Brexit Begins

Post-Brexit future relations between the UK and the EU are contained in a document signed on 24 December 2020: the EU-UK Trade and Cooperation Agreement (TCA). On 30 December 2020 UK Parliament ratified TCA by passing the European Union (Future Relationship) Act 2020 (EUFR), which came into force on 1 January 2021 – but only provisionally. TCA awaits ratification by the EU to become legally binding on the UK and EU later in 2021.

Notable absences from TCA of key features previously enjoyed by the UK as an EU member state include: membership of the European Single Market and Customs Union (save for Northern Ireland’s special arrangements avoiding a hard border with the Republic of Ireland); participation in most EU funding programmes; joint EU/UK law-enforcement and security cooperation including access to real-time crime data; joint EU/UK defence and foreign policy cooperation; and the authority of the European Court of Justice for dispute settlement.

EUFR empowers UK government ministers and devolved governments (of Scotland, Wales, Northern Ireland) to promulgate detailed rules and regulations in future, which means there are a myriad of settings and circumstances not yet explicitly covered (as at January 2021). Authoritative governmental rules, regulations and explanatory guidance will be published during 2021. Meanwhile, for UK-based artists, art businesses and art institutions, key aspects of how they may operate in a post-Brexit environment are briefly summarised as follows.

Artist’s intellectual property rights continue unchanged by TCA because UK and EU laws follow common standards of key worldwide IP treaties and conventions, which TCA declares shall continue. In particular, the UK and EU follow the Berne Convention for the Protection of Literary and Artistic Works, and the World Intellectual Property Organisation’s Copyright Treaty and Agreement on Trade-Related Aspects of Intellectual Property Rights: copyright protection is automatically given on creation of an original artwork for the artist’s lifetime plus 70 years after death; and Artist’s Resale Right automatically gives the artist an inalienable right (for life plus 70 years post-mortem) to receive a small percentage share of the purchase price of re-sales of their original works by art-market professionals (payable through artists’ collecting societies such as DACS).

Physical movement of artwork between the UK and EU is subject to extensive provisions in TCA dealing with ‘trade in goods’ (broadly defined as including ‘Works of Art, Collectors’ Pieces and Antiques’). Although TCA generally prohibits the UK and EU from imposing on each other tariffs, quotas and import/export taxes on goods moved across UK/EU borders, nevertheless new border control checks on goods may be made. Such checks include whether extensive documentation has been prepared (before border arrival) identifying and describing each good, its place of origin, key components and characteristics, and financial value. Before Brexit, no such documentation and checks were imposed at UK/EU borders.

Value Added Tax (VAT) is imposed indirectly on buyers of goods at point of sale (collected for remittance to government by the trader/seller over and above the sale price). TCA deals with Import VAT on goods traded between the UK and EU: imported goods are charged Import VAT, while exported goods are exempted from VAT. TCA requires that Import VAT is payable by buyers of goods imported into their own country. For example, UK-based buyers of goods from an EU country are subject to UK Import VAT of 5%; and EU-based buyers of goods from the UK are subject to Import VAT in their home member state (eg France and Germany 5.5%, Belgium and Sweden 6%, Austria and Spain 10%, Denmark 25%).

Because the EU is a Customs Union allowing free movement of goods between member states, no Import VAT is payable on such movement. This means that sellers of goods based outside the EU invariably transport their goods into an EU country with the lowest Import VAT rate. Before Brexit, the UK was the port of entry into the EU favoured by most non-EU sellers of art because the UK had the EU’s lowest Import VAT rate of 5%. For example: before Brexit, US-based sellers to Denmark-based buyers would favour transporting goods from US to UK (paying 5% Import VAT) then re-transporting to Denmark (paying no further Import VAT); after Brexit, such non-EU sellers to EU-based buyers are likely to favour transport into (say) France or Germany (paying 5.5% Import VAT) then re-transporting without further VAT payment to any other EU country.

To ease cash-flow for UK-based art traders (and reduce transport congestion at UK/EU borders), the UK Government introduced a special ‘Postponed VAT’ accounting scheme for imports into the UK from any other country worldwide (therefore now including the EU). UK VAT-registered art importers may apply to defer Import VAT payment at the UK port of entry (but must account for it in their subsequent VAT returns to HMRC) for goods valued over £135. For goods imported into the UK valued £135 or less, a new ‘Supply VAT’ scheme operates requiring an overseas-based seller (to a UK-based buyer) to register in the UK for VAT and to collect UK VAT at the point of the overseas sale. Many overseas-based sellers of goods valued at £135 or less are reportedly choosing not to supply to UK-based buyers in order to avoid compliance with the UK’s new Supply VAT registration requirements.

There continue to be special Import VAT exemptions for UK museums and galleries transporting their artwork overseas for temporary public not-for-sale exhibitions and touring shows.

Free movement of EU citizens of the EU’s 27 member states (to establish a business, be employed, study or become residents in any EU member state) no longer applies to UK citizens post-Brexit for visits of more than 90 days in any 180-day period (for which they will need to acquire an EU entry visa and hold a passport with at least six months left before its expiry date).

As UK-based artists, art businesses and art institutions grapple with the complex post-Brexit landscape (and keep weather-eyes open for further rules and regulations and authoritative guidance), initial beneficiaries dealing with what currently appear to be mountains of new ‘red tape’ are likely to be specialist art import/export agents, transporters, consultants, accountants and lawyers paid to advise and assist.

© Henry Lydiate 2021

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This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.