VAT: Impact of Brexit on returning expatsby
Jason Croke tells the tale of two British citizens subjected to £6,211 of import taxes on their own possessions because the residence relief wasn’t applicable.
Mr and Mrs Brooks moved to France in 1991, while Mr Brooks worked for an international company.
Mr Brooks retired in July 2016 and the couple decided to move back to the UK, so they placed their French (and only) residence on the market. They rented a property in Bristol (from their daughter), registered with a local GP, the local authority, electoral roll and also joined a bridge club (the card game, not the Clifton suspension version).
For all intent and purposes, they were now resident in the UK from July 2016. They visited their French property regularly to maintain the property and gardens. They also left most of their furnishings in the French property, as otherwise they would have had to pay for shipping and storage in the UK. Also, a furnished house looks better than empty rooms from a sales/marketing perspective.
Anyone who has ever purchased or sold property in France will know the process is painfully slow. It was not until November 2020 that a binding sale was agreed and with the additional burden of Covid, the furnishings were not shipped back to the UK until after Brexit (31 December 2020).
It was on that shipment that they were charged £6,211.67 in import duty and VAT, and Brooks appealed against that charge to the first tier tribunal (TC08333).
Brooks’ core defence was that the July 2016 move was in form only, in reality they were still living between France and the UK. Between July 2016 and November 2020 they had spent 177, 153, 27, 207 and 230 days in each respective year in the UK.
In summary, a person entering the UK is not required to pay any duty or tax in respect of property imported into the UK on condition that:
- they were normally resident in another country for a continuous period of at least 12 months
- they intend to become normally resident in the UK
- their property has been in their possession and used by them in the country they are moving from
- the property is declared for relief not earlier than six months before the date on which they become normally resident and not later than 12 months following that date.
That last condition reveals the problem. The Brooks’ return to the UK was in July 2016 when they obtained accommodation, registered for a local GP and the local elections. HMRC was clear that they changed their residency in July 2016 and that the couple could have done a number of things to avoid the issue, such as pay to store the furniture in the UK or sell the furniture in France.
In effect, the relief from duty/tax was not available because they had moved to the UK in 2016 and only moved their possessions 54 months later in 2021. Brooks did not persuade the tribunal that they were still resident in France up until the sale of the French property.
It was not helped that during his career Brooks paid UK taxes at all times on his earnings rather than French tax. This was also a factor in returning to the UK as he had not paid into the French taxation system to obtain healthcare and other social benefits.
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Jason has over 20 years’ experience working exclusively in indirect taxes (VAT, import duty, SDLT) with owner-managed businesses, corporates and not for profit sectors. He particularly enjoys challenging HMRC decisions, representing clients in tribunals or during inspections.
Experience includes land and property, partial exemption and...