Changes to the temporary import VAT scheme this month could have a major impact on dealers’ cash flow if they do not complete the necessary paperwork soon.
As many in the trade will know, current
rules allow dealers and galleries to temporarily remove (for up to
90 days) artworks from bonded warehouses to show at a gallery or
fair, without incurring the liability to pay import VAT and Customs
duty, provided the works are not sold during that period.
However, from June 30, any works imported
for display at a fair, gallery and auction house with a view to
sale, must enter the UK under Temporary Admission, or they must be
removed from Customs Warehousing to Temporary Admission.
Those who do not obtain full authorisation
via TA face having to put up security for the full amount of import
VAT (and Customs duty if applicable) if they then want to remove
works temporarily under the scheme.
"Temporary Admission (TA) is a specific VAT
importation regime," says Pierre Valentin, partner and art law
specialist at Constantine Cannon, who has highlighted the issue in
his new blog, Art@Law. "The difficulty with TA is that it requires
the importer to provide security to HMRC to cover the import VAT
liability that may become due if the TA procedure is not correctly
discharged. Inevitably, providing security has an impact on cash
flow and can severely undermine smaller businesses."
HMRC had planned to bring the changes in
earlier, but Mark Dodgson, Secretary General of the British Antique
Dealers' Association, and Christopher Battiscombe, Director General
of the Society of London Art Dealers, persuaded the department to
delay introduction until June 30 to prevent issues arising around
the summer fairs in London.
"Convincing Customs they should move the
date to the end of the month was important because it meant that,
provided a dealer with a customs warehouse applies under the
current rules for temporary removals no later than June 29, we have
assurances from HMRC that they will not come under the new, more
restrictive system," Mr Dodgson told ATG.
"The deadline applies to the date they are
removed, so in the case of events such as London Art
Week and Masterpiece, provided dealers comply
with all the other rules about the length of time goods can be
taken out of the warehouse, the fact that the items remain outside
the warehouseafterJune 29 should not be a problem, provided they
left it before that date."
The good news, says Mr Valentin, is that
HMRC recognise the serious impact the changes could have on art
firms and have announced that they will offer a full guarantee
waiver in respect of import VAT to art businesses holding a full TA
authorisation. However authorisation is not automatic.
"Before a full TA authorisation is issued,
the art business must show:
• a good compliance record;
• it meets the financial solvency
• it can demonstrate a good record-keeping
• it has systems in place to identify and
correct any errors found."
He also explained that while some dealers
and galleries hold a simplified TA authorisation, this will not be
enough if they do not want to be forced to put up security.
"They should apply to HMRC (Authorisations
and Returns Team) for a full TA authorisation."
And even those who do hold full TA
authorisation should apply to the HMRC's Authorisations and Returns
Team to obtain approval to use it without putting up security, he
"In other words, the fact that you hold a
full TA authorisation does not mean that you automatically benefit
from the full guarantee waiver."
The new rules also change the circumstances
under which artworks can be temporarily removed from a Customs
Mr Valentin advises that from June 30, this
will only be allowed if:
• the temporary removal is solely for the
purpose of viewing in a venue other than one qualifying as private
premises or allowing public access - HMRC are likely to interpret
this "for viewing" exception restrictively;
• the artworks are first moved to TA (and
security is given unless authorised by HMRC) or another approved
• the artworks are removed to free
circulation, and import VAT is paid; or
• the artworks are re-exported.
Meanwhile, Mr Dodgson said that HMRC
recognised that each dealer's circumstances will vary.
Dealers only removing art to show at
European fairs may feel there is no need to apply for the full TA
authorisation status, he said.
In addition, if most removals involve
re-exports, without the need to show objects to potential clients
in the UK, they should be unaffected by the changes and probably do
not need to apply for full TA authorisation. However, if they
regularly exhibit at UK art and antiques fairs or wish to remove
works from their warehouse to show to potential customers, the
changes will affect them.
"I understand from Revenue and Customs that
there are still a number of dealers with a customs warehouse who
have not applied for full TA authorisation," Mr Dodgson told
"If, having considered their options, they decide to apply for
full TA authorisation, I strongly urge them to complete form
C&E 1331 and submit it to Leeds as soon as possible. Members
have already been granted the status fairly promptly and I am not
aware of major problems with their applications."