The practical steps set out in the answers below are on the basis that all statutory conditions are satisfied, the paperwork is completed accurately, and all material is submitted to HMRC on time.
What are the VAT implications where a UK artist:
- Travels to the EU for a residency/to work and brings back a finished/unfinished work;
- Travels to the EU and back for a temporary exhibition with a finished work; or
- Travels to the EU to visit a gallery (with an artwork) for semi-commercial/cultural purposes i.e. to showcase a work/generate interest but in the knowledge it's unlikely to be sold.
There’s a different way to declare goods that are for personal use or commercial goods being taken in or out of Great Britain. The artist will first therefore have to confirm whether they are moving the goods for "personal use" or as "commercial goods" (i.e. to sell or use in their business). Whilst each case would be decided on their own facts (and for the exports, would depend upon the interpretation of the EU port of arrival), we would likely expect all of the purposes above to be classified as "commercial use".
On importing the work into the EU for any of the purposes above, the artist will need to consider whether any: (a) import duties; and/or (b) EU VAT would be levied in the EU port of entry. This will depend upon the particular type of work being imported and its purpose.
- For artworks imported from the UK to the EU, there should be no tariff or quota imposed in accordance with the UK/EU Trade Agreement, provided the works meet the "rules of origin" requirements applicable to the specific work and the particular EU jurisdiction of entry.
- VAT may apply in the EU jurisdiction of entry, however a relief may be available subject to the relevant requirements and conditions being satisfied. For example, if the artist was registered for VAT in that EU jurisdiction, they may be entitled to import the works zero-rated where the goods will be supplied to VAT registered traders in the EU and, at the time of import, are already consigned to that person in another EU country. In another example, the artist may be able to claim a relief for temporary importation. The UK equivalent of this is known as "Temporary Admission Relief" – but the artist would be subject to the rules and conditions in the EU in claiming their equivalent to such relief.
- The artist will need to comply with any:
- export reporting obligations under the UK rules; and
- import reporting obligations applicable in the EU jurisdiction of entry.
On bringing the works back to Great Britain, the artist will then need to consider the UK rules and requirements. Broadly:
- The artist will need to comply with any export reporting obligations under the relevant EU member state's rules.
- They must:
- have an EORI number that starts with "GB"; and
- submit either a full UK customs import declaration, a simple online declaration or an oral declaration at the ‘goods to declare’ channel or the red point phone in the customs area at the UK port. To do so, they will need to report key information on the item, including their "customs value" (and notably whether that value is more or less than £1,500), weight, description and whether it is a "restricted good".
- Subject to any applicable reliefs, they will have to pay VAT, although for artworks, this is usually at an effectively reduced rate of 5%. The eligibility for reliefs will depend upon the item, purposes, and any relief claimed on export. If the goods were originally sent out of the UK temporarily – such as for an exhibition, or because they were on sale or return and they were returned – there should be no UK VAT due on import. Otherwise, the artist may be able to obtain "Returned Goods Relief".
- In the same vein as the EU import rules, there should however generally be no UK tariff or quota payable on the import from the EU, subject to the UK "rules of origin" requirements. If the works have been partially made in the EU, the analysis for the rules of origin will need to be considered closely.
- If the artist is VAT registered, they should retain evidence of their declaration to allow them to recover the import VAT paid as input tax on their VAT Return. If the artist exported goods and then re-imports them, they may be able to claim back the VAT paid on import. However, if they made a simple online declaration, they will not be able to account for import VAT on their VAT Return.
What are the VAT implications where an artist travels to the EU to repair an artwork in situ, taking materials with them?
A relief known as "Outward Processing Relief" should allow for goods to be temporarily exported from the UK for "repairs" and then returned to the UK relieved of certain customs charges and import VAT. There are strict conditions to the relief, and notably "repair" is strictly defined as goods being restored to their original working condition, not improved.
On importing back to the UK, the artist will usually pay duty at re-import on charges made for repair, plus any inward shipping and insurance costs paid for the return of the goods. UK VAT is charged on the repair costs, plus outward and inward freight charges, plus duty (if any), but excluding insurance charges. As such, they should not have to pay duty on goods that have been repaired free of charge under a guarantee, or a service contract or warranty that they've paid for.
The artist must apply for an outward processing authorisation, for which they must be established in the UK. They may need an import/export license, and/or guarantee, depending on the items being exported. The artist should include their outward processing relief authorisation number on your export declaration and import declaration.
A sculptor was recently required to pay import duty in Italy when he sent a sculpture of his to his studio there to repair. Will he have to pay import duty here as and when he brings it back?
In special situations you can apply for retrospective authorisation under Outward Processing Relief after you have exported the goods for such repairs. This is called a retrospective authorisation. You can only apply for it once every three years.
If eligible, the sculptor will need to have records that show that the goods were eligible for the relief, that he had a business need, and that he has otherwise followed the outward processing procedure correctly.
If not, the sculptor may be able to reduce any UK import duties payable on return by claiming Returned Goods Relief, subject to the conditions for that separate relief being satisfied.
Selling a European artwork in the UK – what percentage VAT would be payable when shipping from the Netherlands (where an artist is based there)?
Where VAT is payable on such artworks (and no relief applies), it would usually be levied at an effective reduced rate of 5%.