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
Archive: 2013 (Jan-June)
The payment of bribes to foreign customs officials to facilitate the importation of goods in a foreign country has recently been in the spotlight after the Ralph Lauren Corporation made facilitation payments to Argentinian customs officials in connection with the importation of goods into the country.
On 22 April 2013, it was reported that the Ralph Lauren Corporation (a US company) would pay over USD 1.6 million to US authorities as part of a settlement for violations of the Foreign Corrupt Practices Act. This followed the discovery that the Argentinian subsidiary of the corporation paid bribes and made gifts to Argentinian customs officials between 2005 and 2009, to ensure that goods were imported into the country without inspection and without necessary paperwork. The corporation discovered the misconduct during an internal review and promptly reported it to the regulators. As a result of its co-operation with the authorities, the Ralph Lauren Corporation has not been charged with violations of the Foreign Corrupt Practices
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).
You may regard yourself as an art collector. Occasionally you may sell an artwork or two. You expect to be taxed on those sales as a collector. It may come as a surprise that the Revenue should seek to tax you as if you were an art dealer. A nasty surprise, in fact, because your tax liability as a dealer may be significantly higher than as a collector. The Swiss Federal Tribunal recently considered the fine line between selling art
Richard Prince has won his appeal against a first instance ruling in the US that 30 of his works infringed copyright in photographs by Patrick Cariou. In a victory for appropriation artists, the US Court of Appeals reversed the 2011 decision by the district court that had found for Cariou. The Court ruled that all but five of Prince’s works were fair use under US copyright law. Whilst living in Jamaica amongst Rastafarians in the mid-1990s, Cariou took a series
The London Upper Tax Tribunal accepts that an old master painting is a wasting asset, thereby escaping capital gains tax upon its sale. In November 2001, the executors of Lord Howard sold at Sotheby’s the portrait of Omai by Sir Joshua Reynolds. The portrait was painted shortly before 1776. Lord Carlisle bought it in 1796 and the painting hung at Castle Howard for over 200 years until it was sold. The question was whether the executors of Lord Howard were
New legislation is introduced in New York requiring galleries to hold sale proceeds owed to artists on a separate account. Galleries do not always segregate the percentage of sale proceeds due to the artist from the percentage of sale proceeds owed to the gallery. Instead, they place total sale proceeds in a single account and use them to pay for the gallery’s operating expenses. If the gallery is in financial distress, it may be unable to pay the artist because
French Court rules that the resale right must be borne by the seller. In December 2012, the French Court of Appeal held that where the resale royalty is due in France on the sale of an original artwork, the economic burden of the right falls upon the seller. A contractual term purporting to displace the economic burden onto the buyer is void. The decision declared null and void a clause in the general terms and conditions of Christie’s France that
The Dutch Competition Authority investigates auction rings. Traditionally, auction rings involve a group of dealers agreeing not to compete against each other in the auction room in order to keep the price of property offered at auction artificially low. The members of the ring select one of them to bid on a lot, and at the end of the auction, they conduct a second private auction, during which the lot is re-sold to the highest bidder amongst the ring members.
French Court takes a radical approach to auctioneers’ liability. In a recent decision (18 January 2013), the Paris Court of Appeal held that an auctioneer was strictly liable to the buyer of an artwork if he described it as authentic when it was not. Strict liability means that the auctioneer is liable irrespective of whether he was negligent in cataloguing the artwork. He is liable if he gets it wrong. The facts were that in April 1987, Daniel Fisch bought