Moving to the UK and import taxes – Have you taken all your personal possessions (and art) with you?
21 April 2023 | Applicable law: England and Wales | 3 minutes
Moving all your personal possessions, including artwork and antiques, from one home to another can be a stressful endeavour. Moving it across different countries multiplies that exponentially. Think international relocation companies and shipping containers, time delays and items lost. It is therefore not surprising that one may be tempted to delay any non-essential parts of the move. Often, the 'rest' left behind makes up the most valuable part of the whole.
However, when relocating to the UK, individuals should bear in mind that a delay in bringing personal items to the UK may have significant import tax consequences.
Are my personal items subject to import tax?
Yes, at least in principle. Every item of tangible and moveable property entering the UK is, in principle, chargeable to relevant import taxes.
As such, an individual who imports their own personal property for their own future private purposes is potentially chargeable to import taxes, although a number of exclusions apply in practice.
What qualifies as 'import tax'?
In principle, three types of import tax are in scope when importing assets to the UK:
- excise duties;
- custom duties; and
Excise duties only affect certain categories of subject matter (mainly alcohol and tobacco in an imports context) whilst the other two types of tax are potentially applicable to imported goods on a much broader basis. Customs duty is levied at a nil rate in respect of a fairly large number of asset classes, including most types of artworks, antiques and collectibles (so that, in practice, the focus of the charge tends to be on newly manufactured consumer goods plus a wide range of industrial or agricultural commodities, although caution should always be exercised in relation to any item of 'art' that is not a conventional painting, drawing or sculpture).
Therefore, generally speaking VAT is the one tax to pay attention to, as it applies to the majority of imported goods.
In the UK, VAT is perhaps typically associated with commercial transactions occurring in the course of business. However, the headline domestic VAT rate (currently 20%) is also levied in an import context, although most categories of artworks, antiques and collectibles benefit from an effective 5% rate of import VAT.
With the UK leaving the EU, the EU is now, in principle, no different from a country such as the USA or Australia when considered from a UK import / export perspective. See here for our previous article on UK import taxes on art post-Brexit.
If VAT is payable, what should be the value of my personal possessions?
Import taxes are generally speaking levied by reference to the prescribed customs value of any goods imported. The identification of the relevant customs value might sometimes be a contentious matter, as there is more than one possible means of valuing imports for such purposes. It is therefore essential that, if any import tax is in scope, proper valuation advice is sought at the start of the process because underpayments of import taxes could have serious consequences (including possible confiscation of imported goods).
So, are all my personal possessions going to be subject to import taxes?
Most items of very low value are excluded and various items are excluded if imported personally (most obviously, the clothes and jewellery being worn by an individual about their person at the moment when they enter, or re-enter, the jurisdiction).
Items temporarily removed from the UK may usually be returned on an untaxed basis under the 'returned goods relief' regime if they re-enter the jurisdiction in the same ownership and in a substantially unchanged condition within three years (although Brexit complicates this in an EU context).
Various temporary reliefs from import taxes are useful in some art-related contexts (for example, if seeking to exhibit a painting temporarily at a gallery or if bringing an item into the jurisdiction for restoration, cleaning or expert valuation). However, such reliefs will be of little assistance when simply moving personal items into the jurisdiction in the context of a personal long-term relocation.
In principle, if none of these reliefs are applicable, then the personal possessions left behind will be subject to import taxes upon crossing the UK borders, unless this transfer is done in a timely manner.
Transfer of residence relief – time is of the essence
Individuals who are relocating to the UK bringing their personal possessions with them, can claim transfer of residence relief from import taxes.
However, time for the application of the relief is of the essence, as it only applies to goods imported within the first 12 months of the owner's relocation. Although this may feel like a long way away when packing bags and buying plane tickets, time will tick along much faster than one may think, due primarily to a couple of restrictions to the relief.
The first catch in the rules is that the 12-month window starts with the individual becoming normally resident in the UK. For VAT purposes, it is prudent to assume that normal residence begins immediately on arrival, at least in situations in which general lifestyle choices point towards the immediate existence of an intention to settle in the UK on a long-term basis. This point in time may well therefore be different from when the individual becomes tax resident in the UK for all other tax purposes under the statutory residence test, or indeed at a time when they still consider themselves as a tax resident of the jurisdiction they are leaving, under domestic rules or double tax treaties (which do not apply to VAT).
The second timing hurdle comes in the form of organisation. Since an act of importation can only meaningfully occur when goods reach the point at which a relevant customs declaration needs to be made, the time limit for entry of goods strictly falls to be applied by reference to the date of arrival of a relevant ship, aircraft, train or lorry at an official point of entry into the UK. As anyone who has had to deal with international shipping and insurance will tell you, getting the timing right is no mean feat. Advance planning is essential.
Do you need all your possessions anyway?
If there is the intention of selling some personal high-value assets (for example artwork or antique pieces), it is advisable to assess whether it may be better to sell them from where they are rather than once they are on UK shores.
A sale of private assets would not generally fall within the scope of UK VAT whether the assets are in the UK or not, even if the owner was tax-resident and/or physically present in the UK at the point of sale. VAT may however have been payable upon import. Additionally, it would be necessary to consider the impact of a potential capital gains tax charge on sale, and the result of that analysis will depend primarily on the tax profile of the owner at the time of sale and in future years.
We can help guide you through this process and ensure that proper planning does not get lost in the move.