Top Tips Guide To Yacht Finance

Those seeking to purchase a yacht or superyacht may often need to borrow the funds in order to buy it. But there are a number of other financially sound reasons to pursue this route, even if you have already amassed enough wealth to buy the asset in the first place. These include both practical and legal arguments ranging from running-cost benefits to tax advantages. In this article, Jonathan Hadley-Piggin provides a definitive guide to yacht finance.

REGISTRATION AND FLAG PREFERENCE

A flag state is the country under whose laws a yacht is registered. This might be the country in which the owner lives or a ship registry in a country more synonymous with the complexities that surround charters and yacht ownership. Registration also grants the privilege and protection of flying the flag of that particular country. Every maritime nation, and even some land-locked countries such as Switzerland, has a system of ship registration that permits the registration of mortgages and other security interests.

In 1993, a centralised UK registry replaced the system of individual registries in each major port. The centralised registry is divided into four separate parts, of which two are relevant to yachts:

PART I

This is the main register consisting of merchant ships and yachts alike. It is a full title register and has the facility to register mortgages

PART III

This is for small ships of under twenty-four metres in length. Known as the Small Ships Registry (abbr. "SSR"), it is not a title register and it can only be used by individuals rather than companies. There is also no means of registering a mortgage on the SSR.

A bank wishing to finance a UK-registered yacht will, for the purposes of registering a mortgage, need to register the yacht on Part 1 of the register.

REGISTRATION OUTSIDE THE UNITED KINGDOM

For taxation reasons amongst others, the majority of traditional flags have been overtaken in size of fleet by the socalled open registers, often referred to as "the Flags of Convenience". The largest flags of convenience nations are:

Panama Cyprus Liberia The Bahamas However, the trend for using flags of convenience has not been extended into the yachting world to the same extent as that of merchant shipping.

To counter the growth of the open registers, a number of European nations have actively encouraged so-called "off-shore" registers. In the case of the United Kingdom, there are, in addition to the mainland register, a number of overseas possessions that offer registers which confer British status to a yacht while at the same time offering fiscal advantages that may not otherwise be available to yacht-owning companies based in mainland UK.

The following British overseas possessions have their own ship registers that are often used for the registration of yachts:

Anguilla Guernsey Bermuda...

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