The First Tier Tribunal (FTT) has dismissed an appeal by Mrs Ahmad against HMRC’s decision to refuse repayment of VAT paid on the import of artworks exhibited in London and subsequently returned unsold to the US, highlighting the risks of not preparing the correct customs declaration in advance for imports.
A subsequent claim for repayment of VAT was rejected by HMRC because it was made after the deadline of one year from entry of goods.
The saga started in October 2011, when Ahmad sent various items of artwork from the US to a gallery in London. The purpose was to exhibit the items for sale.
In the Customs Entry Advice made by UPS, the gallery was shown as the importer, and the consignor was Fanoos Art Crystal, being the business name used by Ahmad.
The VAT charged was £1,768 at the reduced import rate of 5%. Ahmad had to pay the VAT, otherwise the shipment would not have cleared customs. The date of export of the unsold items from the UK to the US was 23 October 2012.
On 18 December 2012, Ahmad wrote to HMRC’s National Duty Repayment Centre (NDRC) claiming a refund of all of the £1,768 VAT and enclosing Form C 285 (application for repayment/remission). No evidence indicated that Ahmad had contacted HMRC before the export of the items from the UK.
On 9 January 2013, NDRC wrote to HMRC’s National Temporary Admission Section (NTAS), enclosing the papers that had been submitted by Ahmad. The letter explained that the papers had been submitted as a repayment claim, but were being forwarded to NTAS, as they related to a temporary import. NTAS treated the claim as an application for Retrospective Simplified Temporary Importation Authorisation (Regulation 2454/93, art. 508), but rejected the claim, because:
- it should have been submitted within one year of the import on 27 October 2011; and
- even if the application had been made in time, Ahmad would still not have been entitled to a repayment, as she must show that the goods had been exported. There appeared to be no formal export declaration, only an air waybill. Various items of information must be stated in an export declaration, and these omitted from the air waybill.
In dismissing Ahmad’s appeal, the FTT held that goods imported into the UK are charged to VAT unless relieved under the legislation. The use of CPC 400000, the standard import code, meant that VAT was charged as normal for an import.
If in good time the VAT implications had been considered before the artworks were imported into the UK, it might have been possible to bring them into the UK without incurring VAT at that point
As VAT had to be paid on the import of the artworks, the only way in which it could be repaid was if a relief applied.
Since the import of the artworks in 2011 was for longer than a year, HMRC’s discretion to grant a retrospective authorisation for temporary import was unavailable. There was no other relief from the VAT charge (para 38 of the decision).
Stanley Dencher, tax writer at CCH, said: ‘The FTT lacks general discretionary power in relation to appeals. It must work within the law.
‘If in good time the VAT implications had been considered before the artworks were imported into the UK, it might have been possible to bring them into the UK without incurring VAT at that point.
‘The VAT treatment of goods imported for exhibition has been clarified for imports from 30 June 2013 in Customs Information Paper (13) 22, which states that “from 30 June 2013 all goods imported for exhibition with a view to sale, possible sale, for sale by auction or similar activities, should be entered to TA [ie, Temporary Import], either directly at import or on removal from a customs warehouse if a period of storage is required”.
‘This is too late for Ahmad, unless she sends more artwork to the UK for exhibition and possible sale,’ added Dencher.
The case, Ahmad [2014] TC 03674 UKFTT 548, was heard by Judge John Clark. The decision was released on 3 June 2014.