Owning a yacht or helicopter: structuring options and tax considerations

Freedom, luxury and the ability to travel on your own terms. Whether it’s sailing through the Mediterranean or flying between country homes, these assets often start as personal aspirations. But once the dream feels within reach, the next question is: how should you structure ownership?

For individuals considering the purchase of a high-value asset such as a yacht or helicopter, the ownership structure can significantly impact their tax position, reporting obligations and access to reliefs. This is particularly relevant where there’s a mix of personal enjoyment and potential business use.

The table below compares common ownership structures – including holding the asset personally, through a company, via an LLP, or simply hiring it – and highlights the tax, legal and practical implications of each. It covers key points such as benefit in kind (BiK) exposure, capital allowance availability, VAT recovery, and the potential application of Section 455 tax charges on director loans.

The most suitable option will depend heavily on the intended use of the asset (private vs business), the funding route, and the wider context e.g. estate planning or business structuring. Importantly, some structures that might initially seem tax-efficient can have unintended consequences, such as impacting trading status for Business Property Relief (BPR) or triggering personal tax charges.

This summary is intended to provide a high-level comparison. Given the complexity of the rules, particularly around BiK, capital allowances, and company taxation, tailored professional advice is essential before proceeding.

table with text Comparing Ownership Structures

Key considerations and planning points for owning high-value assets

While the comparison above outlines headline tax and structuring issues, in practice, there are a number of points that warrant further consideration:

1. Personal use can trigger significant tax charges

If an asset like a yacht or helicopter is held in a company and made available for personal use (even if not actually used), this can create a substantial BIK charge based on the full cost of the asset, including VAT and running costs. These charges are often far higher than anticipated.

2. Section 455 risk for private companies

Where a director/shareholder borrows money from a company to buy the asset, Section 455 tax may apply if the loan is not repaid within 9 months of the company’s year end. Whilst a temporary tax charge, this can be a cash flow trap, especially for large purchases.

3. Beneficial loans

If an individual has a loan from a company, for example to fund the asset, a BiK would arise on the loan if it’s taken out interest free or below HMRC’s official interest rate. Class 1A NIC will apply, which is at the same rate mentioned in the table above; 15%.

4. Trading company risks

If a trading company holds an asset like a yacht that’s also used for private purposes, this can taint the company’s trading status. It may affect eligibility for Business Property Relief (BPR) for Inheritance Tax — a key consideration in succession planning. It can also jeopardise Capital Gains Tax reliefs such as Business Asset Disposal Relief (BADR) and Holdover Relief, both of which depend on the company maintaining a genuine trading status (with at most insubstantial non trading activities).
When making a gift of such an asset, the availability of BADR or Holdover Relief can be critical in reducing or entirely mitigating the Capital Gains liability on the disposal.

5. LLPs offer flexibility but are not tax-free

LLPs can be a flexible way to hold assets, especially where a mix of personal and corporate members are involved, and don’t currently give rise to a BiK if there is private use of the LLPs assets by the members. However, s455 tax issues can still arise depending on how the LLP is funded.

6. VAT recovery is possible – but complex

In certain cases, it may be possible to VAT register and recover VAT on the purchase and running costs of the asset, especially where there’s genuine business use (e.g. charter income). But this requires careful structuring and robust documentation — HMRC scrutiny is likely.

Why do LLP structures mitigate Benefit in Kind (BiK) charges?

Unlike company directors or employees, LLP members are treated as self-employed for tax purposes, not as office holders or employees. This means that when an asset (like a yacht or helicopter) is made available to the members for personal use via an LLP, no BiK charge arises in the same way it would for a company-owned asset. Instead, the tax consequences typically flow through the LLP’s profit allocation and the self-assessment of the individual member. However, this does not eliminate all tax risks – for example, there may still be s455 tax implications depending on how the LLP is funded, and there will continue to be VAT and capital allowances implications to consider.

Note: An LLP can have both individuals and limited companies as members.

Closing thoughts

Owning a high-value asset like a yacht or helicopter might be a dream for many, but the reality comes with complex tax, legal, and administrative considerations. Choosing the right ownership structure can have significant implications for cost, compliance, and control. Ultimately, the best structure will depend on your specific goals, usage, and financial position. Professional advice is essential to make sure your chosen route is both tax-efficient and commercially sensible.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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