HMRC have announced changes to the UK bonded warehousing regime.  The purpose of the bonded warehousing regime (the technical phrase is “Customs Warehousing”) is to allow for the indefinite storage of non-European Community goods without triggering liability to pay import VAT and Customs duty.

Until now, it has been standard practice in the UK for dealers and galleries to temporarily remove (for up to 90 days) artworks from bonded warehouses to show the artworks at a gallery or to exhibit them at a fair.  In theory, the goods could not be sold whilst they remained out on temporary removal.  If a buyer offered for the item, before the sale could take place it would be returned to the bonded warehouse, whereupon after their discharge to another Customs regime, the sale would be concluded.

This is set to change.  From 30 June 2013, artworks imported for exhibition with a view to sale, for example at a fair, in a gallery, at an auction house or as part of an exhibition, must enter the UK under Temporary Admission, or they must be removed from Customs Warehousing to Temporary Admission.

Temporary Admission (TA) is a specific VAT importation regime.  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.

In a recently published Customs Information Paper (Ref: JCCC CIP (13) 22), HMRC have announced that to mitigate the potential cost impact of TA on businesses, they will offer a full guarantee waiver in respect of import VAT to art businesses holding a full TA authorisation.  Here is the catch: before a full TA authorisation is issued, the art business must show:

  1. a good compliance record,
  2. it meets the financial solvency criteria
  3. it can demonstrate a good record keeping history, and
  4. it has systems in place to identify and correct any errors found.

Some dealers and galleries hold a simplified TA authorisation.  They should apply to HMRC (Authorisations and Returns Team) for a full TA authorisation if they do not wish to put up security.

Dealers and galleries already holding a full TA authorisation should apply to HMRC (Authorisations and Returns Team) to obtain approval to use it without putting up security.  In other words, the fact that you hold a full TA authorisation does not mean that you automatically benefit from the full guarantee waiver.

If the dealer or gallery cannot obtain a full TA authorisation, they must give security for the full amount of import VAT (and Customs duty if applicable – see article on the importation of electrical and video installations in this blog).

From 30 June 2013, it will no longer be an option to temporarily remove artworks from a Customs Warehouse, unless:

  • the temporary removal is solely for the purpose of viewing in a venue other than a venue 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 VAT regime,
  • the artworks are removed to free circulation, and import VAT is paid, or
  • the artworks are re-exported.

Pierre Valentin

Articles published on this blog reflect the opinion of the stated author of the article only. The information they contain does not constitute legal advice.