22 March 2019 - Article
Cultural property brought to the UK from outside the EU may be held in the UK in a VAT suspensive regime (technically, a ‘Customs procedure'), provided that certain conditions are met. Whilst the property is held in a VAT suspensive regime, liability to pay import VAT is suspended. If the property is removed from the VAT suspensive regime and brought into free circulation in the EU, import VAT becomes due. If the property is removed from the VAT suspensive regime and removed from the EU, import VAT is not due.
There are several types of VAT suspensive regimes. For example, the property may be held under Temporary Importation (‘TI'), or it may be held in a bonded warehouse. Each VAT suspensive regime imposes strict conditions.
Where cultural property is held under temporary importation or in a bonded warehouse, do you require an export licence to remove the property from the UK and, if you do, what type of export licence do you require? Is it an EU licence or a UK licence?
Until a few months ago, the government applied the same principles to cultural property in free circulation and to property held in temporary importation or in bond: assuming that the property in temporary importation or bond exceeded the relevant thresholds of age and value, a UK export licence would be issued if the property were removed to another EU country, and an EU export licence would be issued if it were removed to a non-EU country. This is no longer the case.
Do you require an export licence at all?
On the question of whether cultural property in a bonded warehouse (technically, a customs warehouse) requires an export licence at all, by Notice dated 12 June 2006, HM Revenue & Customs (‘HMRC') advised that ‘the law governing export cultural licensing applies to all exports of cultural goods'. They emphasised that there was ‘no exemption for goods removed from customs warehouses'. So the principle appears well-established that cultural property held in bond requires an export licence to leave the UK, assuming that it meets the relevant thresholds of age and value
What type of export licence do you require?
In March 2010, the Museums, Libraries and Archives Council (‘MLA') issued a guidance note on the export of cultural goods brought into the UK from outside the EU, but not released in the EU in free circulation. According to the government, cultural property physically located in the UK but not in free circulation (e.g. held under temporary importation or in bond) requires an individual UK export licence (assuming the value of the property exceeds the relevant financial threshold) to leave the UK for a non-EU country. Until this guidance note was published, one would have expected the MLA to issue an EU export licence if cultural property in bond was destined for a non-EU country.
The government takes the view that an EU export licence is required for export outside the EU where the goods are Community goods (i.e. the goods are in free circulation) and they exceed the relevant thresholds of age and value. Where the goods are in bond, they are normally (but not always) classified as non-Community goods (i.e. they are not in free circulation), accordingly they are not subject to the requirement of an EU licence. Instead, they require a UK licence (assuming that they exceed the relevant thresholds of age and value).
The government bases their view on EU law as interpreted by the European Commission. EC Regulation 116/2009 (which replaces EC Regulation 3911/92) on the export of cultural property provides that the export of ‘cultural goods' ‘outside the customs territory of the Community' shall be subject to the presentation of an EU export licence. The term ‘cultural goods' is defined by reference to a list of categories of items in Annex I to the Regulation. In the Annex, each category of items is defined by reference to its heading in the Common Customs Tariff (e.g. pictures and paintings: 9701).
The concepts of ‘Community goods' and ‘non-Community goods' are defined in the Community Customs Code. Community goods are goods in free circulation in the EU. Non-Community goods are goods that have not been released in free circulation.
The Code provides that Community goods leaving the customs territory of the Community (Article 161 of the Community Customs Code) are subject to an exportation procedure. Non-Community goods are not in free circulation, therefore they are not subject to the export procedure. The European Commission's Internal Market Directorate has advised that an EU export licence is required only when cultural property is exported. Under Article 161 of the Code, only Community goods are exported. Accordingly, non-Community goods are exempt from the requirements of Regulation 116/2009.
Thus, the test is whether the items of property are ‘Community goods' or ‘non-Community goods'. If they fall within the former category (and their value exceeds the relevant thresholds of age and value), they require an EU licence. If they fall within the latter category, they do not require an EU licence. The question of whether or not goods are ‘Community goods' is not always straightforward, for example in certain circumstances, goods held under a VAT suspensive regime may be Community goods, and goods relieved from import VAT may also be Community goods.
The government takes the view that cultural goods which do not require an EU licence because they are non-Community goods, nonetheless require an individual UK export licence if they meet the relevant thresholds of age and value.
The Export of Objects of Cultural Interest (Control) Order 2003 provides that ‘all objects of cultural interest of a description specified in and not excluded from the Schedule to this Order' ‘are prohibited to be exported' to any destination except under the authority of a licence. In the Schedule, the definition of ‘objects of cultural interest' is such objects of cultural interest as may have been manufactured or produced more than 50 years before the date of exportation, except four categories (e.g. personal letters). Depending on their value, objects of cultural interest that are not in free circulation in the EU may require an individual UK export licence to leave the EU.
This is a complex and technical area. The Department of Culture, Media and Sport (‘DCMS') have primary responsibility in this area, assisted by the MLA. The UK Border Agency (‘UKBA') holds national policy responsibility in respect of the export of cultural goods from the UK and act as enforcement authority for DMCS.