Moving goods from one country to another can trigger unexpected VAT and customs duty charges. This can be a particular issue for high net worth individuals moving high value goods, such as horses, works of art, cars and yachts.
Where goods are imported into the EU from a non-EU country, an import declaration must be made on arrival. Goods imported into the UK are usually subject to 20% standard rate import VAT and possibly also customs duty, depending on the precise classification of the goods. Customs duty is always an absolute cost, but import VAT may be reclaimable, if the goods are imported for a business purpose.
Take, for example, the situation where an individual purchases an expensive item of jewellery in the US and brings it back to the UK. Although the jewellery was purchased VAT free in the US, it will be subject to 20% UK import VAT and customs duty when it arrives in the UK.
There are a number of reliefs available that can prevent import VAT and customs duty costs arising in certain circumstances. For example, relief may be available for good temporarily imported into the EU in certain situations. In order to claim the relief, the goods must be correctly declared at importation, so it is important to seek advice before the event.
The movement of goods between EU countries can also cause VAT issues, where the goods are business (rather than private) assets. If a business moves its own goods from one EU country to another, a VAT charge based on the open market value may be triggered. For example, if an art dealer moves a work of art to another EU member state and is not already registered for VAT in the country of destination, a UK VAT charge may be triggered, even though the ownership of the goods has not changed. Furthermore, if the goods are later sold whilst in that other EU country, a liability to register and account for VAT in that country is likely to arise.
Some VAT reliefs are available when moving business assets within the EU, such as relief for certain types of temporary movements. However, care needs to be taken, as strict rules and time limits apply.
As can be seen from the above, it is important to consider the VAT implications of moving goods into the EU or moving goods between EU countries, before the movement takes place, in order to ensure that it is done in the most VAT efficient way possible.
If you would like to discuss the above, or any other VAT issues, please contact our family office VAT specialist Lisa Burnside