The Customs Information Paper introducing changes to the temporary removal of goods from Customs Warehousing (see the article on this blog on Changes to the UK Bonded Warehousing Regime) refers to a previous Customs Information Paper (Ref: (10) 44 effective 18 June 2010).  The Annex to that Customs Information Paper seeks to clarify certain procedures for the importation of works of art and antiques for display at galleries, fairs and exhibitions.

The second paragraph of the Annex reads: “Some art works currently being imported into the UK are described as “art installations” or “light installations”.  These typically include some form of audio visual presentations or light display and current practice was to classify these installations according to their constituent parts and not as “art” in Chapter 97 of the Tariff”.  This is a reference to HMRC’s inept argument that a video installation (e.g. by artist Bill Viola) or a light installation (e.g. by artist Dan Flavin) cannot be imported in the UK as an artwork simply because it is disassembled and crated for shipping.  The fact that these art pieces are imported packed in boxes means, so argues HMRC, that they must be taxed as light bulbs, video screens and electric wires, because this is how these artworks appear to HMRC officials when they are wheeled through Customs.  The sub-text is that HMRC officials are so devoid of natural intelligence that they cannot make the difference between an artwork by a world-famous artist (even when it is accompanied by a certificate of authenticity signed by the artist) and a bunch of wires.  Tax should be levied, HMRC go on to say, at the rate applied to electrical and video apparatus, i.e. currently 20% instead of 5% for works of art.  Customs duty should be levied too, as it applies to electrical and video equipment, not to works of art.  This might have been mildly ridiculous, had HMRC not also argued that the higher rate of tax and duty should be applied not on the retail value of the electrical or video equipment (a few hundred pounds) but on the value declared by the importer being the value of an artwork by the artist (typically several hundred thousand pounds).

The second paragraph of the Annex goes on to say: “However, a recent tribunal on similar goods ruled that these goods should be classified in 9703 as ‘statues’”.  This is a reference to the decision of the London VAT Appeal Tribunal which considered whether light and video installations should be imported as art or as spare parts.  Unfortunately, the author of this grammatically flawed sentence, clearly had not read the judgment.  The suggestion that the Tribunal classified artworks by Viola and Flavin as ‘statues’, is risible.  The Tribunal, on appeal brought by Haunch of Venison (represented by this author), ruled that the London gallery (before it was acquired by Christie’s) had correctly imported in the UK installations by Bill Viola and Dan Flavin as works of sculpture.  At trial, the Tribunal rejected HMRC’s argument that these artworks should be treated as electrical and video equipment.  Several high profile art experts gave evidence in support of the argument that installations by these artists were works of sculpture.  In a well-reasoned judgment, the Tribunal concluded that the fact that these artworks were packed for transport did not detract from their attributes as sculptures, and ruled that HMRC should have taxed them as such.  This decision is in line with the well-established jurisprudence of the European Court of Justice.

The second paragraph of the Annex concluded: “This tribunal decision has been referred to the Commission and an EC Regulation has been drafted and will be published in the near future.  The Regulation will classify these installations to their constituent parts”.  HMRC did not take kindly to the decision of the London VAT Appeal Tribunal.  They ran off to the European Commission, and behind closed doors, persuaded Euro officialdom to support the daft argument that works by world-class artists should be taxed as spare parts at the point of importation.  This led to a text-book example of the type of decision-making that brings the European Commission into disrepute.  Minutes of the few meetings leading to EC Regulation (731/2010 published on 14 August 2010) show that a. no serious consideration was given to the issue, b. no experts were called to express a view, c. the jurisprudence of the European Court of Justice was not considered, d. the London VAT Appeal Tribunal was not consulted and e. the Euro officials who considered the issue were remarkably uninformed.  The view was expressed, for instance, that an installation by Dan Flavin is a work of art only when the light is switched on.

In any event, the author of the Annex is wrong when he argues that “the Regulation will classify these installations to their constituent parts”.  Regulation 731/2010 provides that the works of art described in the Annex to the Regulation must be taxed upon importation as electrical or video equipment.  These works of art are described in detail.  The first is a work by Bill Viola known as Hall of Whispers and the second is a work by Dan Flavin known as Six alternative cool white/warm white fluorescent lights.  Whilst Six alternative cool white/warm white fluorescent lights was one of the works considered by the London VAT Tribunal, Hall of Whispers was not.  In any event, whilst the law now is that the two works described in the Annex to the EC Regulation should be imported into EU Member States as set out in the Regulation, we would argue (but this is not free from doubt) that all other video and light installations may be imported in the UK as works of sculptures, in line with the judgment in Haunch of Venison and the jurisprudence of the European Court of Justice.

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.