United Kingdom VAT & Duties Tribunals (Customs) Decisions

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Cite as: [2005] UKVAT(Customs) C202, [2005] UKVAT(Customs) C00202

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Sydney L Moss Ltd v Revenue & Customs [2005] UKVAT(Customs) C00202 (18 August 2005)

C00202

IMPORT VAT REPAYMENT – Goods sent to USA for a trade fair – C88 not available on re-importation of goods – Agents advised Appellant only the C88 would be acceptable as proof of re-importation – Appellant subsequently advised by Customs and Excise that production of import documentation to US would be sufficient – No action taken by Appellant until after 3-year time limit had expired – Whether unforeseen circumstances or force majeure – Appeal dismissed

LONDON TRIBUNAL CENTRE

SYDNEY L MOSS LTD Appellant

and –

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: MISS J C GORT (Chairman)

MR P DAVDA

Sitting in public in London on 21 July 2005

Mr A Rutherston, manager of the Appellant company, for the Appellant

Mr A O'Connor of counsel, for the Respondents

© CROWN COPYRIGHT 2005

DECISION

This is an appeal pursuant to section 16 of the Finance Act 1994 against a decision of the Revenue dated 12 October 2004 to refuse the Appellant's claim for repayment of import VAT, that decision being a review of an earlier decision dated 5 August 2004.

The Appellant is a long-established business specialising in Chinese and Japanese works of art. It regularly sends pieces abroad to fairs and conventions for sale. The majority of the works of art are small and easily portable. 80% or more of the Appellant's business is export. It is normal for there to be two exportations to the United States and one to Switzerland each year.

On 16 March 2001 the Appellant exported 170 antique pieces to New York to sell at an Art Fair. At the end of the Fair some 121 pieces remained unsold and were brought back to the United Kingdom on 25 May 2001 by a member of the Appellant's staff.

The original export had been handled by a firm called JAG. At some time between the export and the re-import of those items JAG was taken over by another firm "Air Action". Air Action were used by the Appellant to handle the re-importation. When the items arrived back in the United Kingdom there was no corresponding form C88, which is the primary document required to prove the original export of the items. Precisely what happened to that document, or who was responsible for the failure of its production either on 25 May 2001 or subsequently, there was not sufficient evidence before the tribunal for us to decide. In the event, in the absence of the C88, HM Customs and Excise (as they then were) were reluctant to accept that the goods had originated in the United Kingdom and the Appellant was informed by Air Action that no other proof of export other than the original export documents was acceptable to HM Customs.

On 13 June 2001 Air Action submitted a Customs declaration showing a declared value of the goods at £389,372.08, giving a liability to import tax at 5% (being the lower rate of VAT applicable to antiques works of art). Accordingly a payment of £19,471.60 was demanded from HM Customs before the goods could be released. which sum was paid and the goods were cleared for introduction into the United Kingdom on 18 June 2001.

The Appellant had needed the goods urgently for an exhibition and, although it did not accept that it owed the sum of £19,471.60, this sum was paid in order to secure the immediate release of the goods. By a letter dated 18 June 2001 the Appellant wrote to Air Action that the VAT was being paid under protest until "we have come to an agreement with regards to proving export." It is clear from the correspondence that as far as the Appellant was concerned, they were not paying that sum over as VAT but were intending that it should be treated as a deposit, pending presentation to Customs and Excise of acceptable proof of the original export of the goods. A Customs agent called Connoisseur International had been employed by the Appellant to deal with the issue. By a fax dated 15 June 2001 a Mr Sean O'Farrell of Connoisseur informed the Appellant that by taking various steps, and by presenting a cheque in the required sum, the VAT would be "paid on deposit pending presentation to Customs of acceptable proof of export." Various instructions were given to the Appellant by Mr O'Farrell.

A company called Art World Shipping had handled the export of the goods on 16 March. It was suggested by Art Action that Art World might have the original C88, but a fax from Art World dated 15 June 2001 made clear that they did not have it. However they did have an unstamped copy, which they were prepared to send if necessary, having deleted the names of other clients who had had items sent on the same shipment. Air Action subsequently suggested that, because the Customs and Excise would only accept the original C88 and therefore it would be more sensible for the Appellant to obtain a refund using its VAT returns, rather than to pursue its present course.

It appears that Air Action may not only have given wrong advice to the Appellant, but also may have over-declared the value of the goods. From the documents subsequently produced by the Appellant the total value of the original 170 items was £193,370, and the declared value of the returned items was £121,275. There was no explanation as to how Air Action came by the sum of £389,372.08 which it had declared. If the true value of the returned items was £121,275, it would have attracted VAT of only £6,063.75. We make no finding as to the actual value of the items, although it seems to us more likely that the smaller sum is the correct one, there being no documentary evidence to substantiate the sum declared by Air Action, whereas the Appellant has provided stock book entries showing the full list of items exported and those which were returned.

Whilst the Appellant submitted the stock list to Air Action, there is no evidence as to what documents, if any, Air Action submitted to Customs and Excise at the time.

On 30 November 2001 an officer of Customs and Excise, Liesa Conlin, visited the Appellant's premises. In the course of that visit Miss Conlin was asked by the Appellant whether the £19,471 import VAT which had been charged on the returned goods could be recovered. By a letter dated 3 December 2001 Miss Conlin replied inter alia as follows:

"I have discussed the import situation with our excise department. They advised that you contact your agent (this does not need to be the agent who handled the original export and import) and request that they make an application to have the import entry amended from a "home use" entry to "returned goods". They will need to complete a substitute entry (Form C88) and also form C285 (request for payment). Additionally, you should provide a copy of your correspondence explaining why an incorrect entry was made in the first instance as well as alternative evidence that the goods in question were in the UK prior to export for the exhibition to support your case e.g. copies of stock records, purchase invoices, agent's invoice for the export, packing lists, export invoices for the goods not returned etc.

"I recommend that you do this as soon as possible as I am advised that the time limits for making these applications are quite restrictive."

By a letter dated 12 December 2001 an employee of the Appellant wrote to Miss Conlin informing her that she herself was shortly leaving the Appellant's employment and informed her that a new agent, Sean O'Farrell of Connoisseur, would be handling the claim.

It would appear that Mr Moss, the director of the Appellant company, was the only permanent employee of the company at the time, and he had understood that the matter was being handled by the company accountant Dubell & Co, and by Connoisseur. The matter appears to have gone to sleep at this stage.

On 26 July 2004 Mr Rutherston, who had recently joined the company, contacted Customs and Excise enquiring about the payment. Subsequently he was advised by Customs and Excise to submit a full account of the situation along with all the relevant evidence to HM Customs and Excise in Dover. This was done by Mr Rutherston by a letter dated 29 July 2004 in which he set out the full circumstances. This was the first occasion on which Customs and Excise were informed that the declared value of the goods was £121,275 and it was suggested that the relevant amount of VAT at 5% should be £6,063.25, not the £19,471.60 which had been paid.

Customs and Excise subsequently refused the Appellant's claim because it was made outside the three-year time limit. The Appellant requested a review of this refusal and on review the decision was upheld. By his notice of appeal the Appellant claimed that: "The loss by customs brokers (no longer trading) of the original export documents for goods taken to the USA for exhibition led to HM Customs and Excise disputing the export, and to import VAT being imposed at levels inappropriate to the goods on re-import. Evidence to be obtained relating to the original export should enable relief to be allowed and VAT suitably refunded."

The law

Section 16(1) of the VAT Act 1994 ("Section 16.1" and "VATA") provides that, except where the contrary intention appears, Community legislation having effect in relation to Community customs duties charged on goods entering the territory of the Community shall apply where relevant to VAT on importation as it applies to any duty of customs.

Article 185 of Council Regulation 2913/92/EEC ("the Code") provides for relief from import duties on returned goods in various circumstances and subject to certain conditions.

Article 848 of Commission Regulation 2454/93/EEC (the Implementing Regulation of "IR") provides that goods will be treated as returned for the purposes of relief from import duties where satisfactory evidence of export is produced.

Regulation 125 of the Value Added Tax Regulations 1995 (1995/2518) goods provides that `subject to such conditions as the Commissioners may impose', import VAT shall not be chargeable on the `re-importation' of certain goods.

The relevant conditions are set out in public notice 236 (`importing returned goods free of duty and tax'). These include (at paragraph 3.1) the provision of export evidence. Paragraph 4.2 provides that the preferred evidence of export is a copy of the export declaration (form C88) or the `officially authenticated information sheet INF3' but that alternative evidence will be considered. Paragraph 4.6 provides that relief should normally be claimed at the time of re-import but that a belated claim may be accepted subject to `certain conditions' (this is apparently a reference to article 236).

Article 236 of the Code provides, at paragraph 1, for the repayment of import duties `insofar as it is established that when they were paid the amount of such duties was not legally owed … `Paragraph 2 provides that the application for repayment must be made within 3 years from the date on which `the amount of those duties was communicated to the debtor' but that `that period shall be extended if the person concerned provides evidence that he was prevented from submitting his application within the said period as a result of unforeseeable circumstances or force majeure'.

On behalf of the Revenue it was submitted that the only appeal before the Tribunal was against the review decision, namely the decision that the claim for repayment be refused on the basis that it was out of time and that there was no appeal before the Tribunal against the initial decision of Customs and Excise to charge value added tax, nor against the rate at which it was charged. It was conceded that were the Tribunal to allow the Appellant's appeal in respect of the issue of the timing of the application, then the Revenue would re-look at the matters of the amount of tax paid, and whether any tax was properly due.

Mr O'Connor submitted that in order to succeed in this appeal the Appellant would have to satisfy the Tribunal that the factual events surrounding the original loss of the C88 amounted to "unforeseeable circumstances" or "force majeure" within the meaning of article 236(2) of the Customs Code. The Appellant has to satisfy the Tribunal that factual events prevented the Appellant from submitting its claim for repayment within the three-year time limit. In the circumstances there was no evidence to suggest that this was the case.

It was further submitted by Mr O'Connor that "unforeseeable circumstances" and "force majeure" in article 236(2) amounted to a cumulative description of one concept, rather than a reference to two distinct concepts. The Tribunal was referred to the ECJ case in Denkavit France SARL v Fonds D'arientation de Regularization des Marches Agricoles Case 266/84. In particular we were referred to paragraph 27 of the judgment which is as follows:

"It should be noted that, according to a consistent line of decisions of the court, the concept of force majeure must be understood in the sense of unusual and unforeseeable circumstances, beyond the trader's control, the consequences of which could not have been avoided even if all due care had been exercised. That concept must be considered in relation to the provisions of each Regulation in which the term "force majeure" appears."

It was the Commissioners' case that the factual events that took place did not meet that test and in any event the Appellant had not shown the precise cause of its failure to produce the C88 or other evidence, and therefore was caught by the time limit.

The Appellant's case

The Appellant's case was based substantially on information it had been given by its agents, principally Air Action. It was under the apprehension that Customs and Excise had misinformed Air Action as to the course of action available to it. The Appellant pointed to the correct value of the re-imported goods as being substantially lower than the value placed on them by Air Action and the consequent over-payment of VAT and claimed that in any event it was entitled to a refund of the over-payments. It was properly acknowledged by Mr Rutherston that Miss Conlin had informed them how to reclaim the VAT at issue, but it was queried why the import documentation which had (apparently) not been acceptable as proof of export in the first place should now be considered to be acceptable.

Reasons for decision

Whilst we sympathise with the Appellant in the circumstances in which it finds itself, nonetheless a large number of its problems are of its own making. Whatever happened at the time of the re-importation of these goods (and we have no doubt that the goods in question were re-imported), and however incompetent either JAG or Air Action were, and even assuming that Air Action was given wrong advice by somebody at Customs and Excise as to what documents could be produced to establish its claim, the fact is that the Appellant was properly advised in December 2001 by Miss Conlin as to what steps it could take to recover the overpaid VAT. The Appellant cannot rely on either the earlier or the later inefficiency, inexperience or incompetence of either its own employees, or the advisers it appointed to look into the matter as amounting to either unforeseen circumstances or force majeure, and its claim is therefore caught by the three-year time limit.

We add in parentheses that we accept the Appellant's submission that unforeseen circumstances and force majeure are separate concepts. We do not accept the submission by Mr O'Connor that the European Court in the case of Denkavit establishes otherwise. A trader might foresee an event, but nonetheless that event may be entirely beyond its control, and the consequences may be such that the trader could not avoid them even if it exercised all due care.

It is unfortunate for the Appellant that Air Action, for whatever reason, ascribed a value to the goods being imported which, on the facts before us, appears to be almost three times their actual value, but that is not a matter which is before this Tribunal, and even if it were, such claim would be caught by article 236 as being outside the three year limit.

This appeal is dismissed. No order for costs.

MISS J C GORT

CHAIRMAN

RELEASED: 18 August 2005

LON/05/7006