01 March 2022
While the UK was a member of the EU, individuals who set up home in another EU member state were able to move their personal effects across borders without clearing them through customs or paying duty and import VAT. However, since Brexit, the position is not so simple. A recent case from the tax tribunals has highlighted a situation where a British couple faced a hefty bill on their return to the UK.
Mr and Mrs Brooks are British citizens who lived and worked in France for almost 30 years before moving back to the UK in 2016. As it was likely to take some time to sell their house in France, they initially moved into a flat in their daughter’s home in the UK, leaving much of their furniture and other possessions in the house in France to save on storage fees before the sale went through.
The sale of the French house was eventually agreed in November 2020, but due to coronavirus restrictions it was not possible to ship their household effects back to the UK until after 1 January 2021, when the UK had left the EU’s VAT and customs regimes. As a result, what would previously have been a free movement of goods between two member states of the EU had to be declared to UK customs on arrival from France. What’s worse, the Brooks’ application for transfer of residence relief, which might have excused them from paying customs charges on their possessions, was denied by HMRC, leaving them facing a bill of over £6,000.
One of the conditions of transfer of residence relief is that the applicant’s personal and household goods must be imported and declared to UK customs within 12 months of becoming resident in the UK. On appeal, the tribunal agreed with HMRC that the couple’s application had been made too late. It decided that Mr and Mrs Brooks had been resident in the UK since 2016, as evidenced by their close family and personal ties here, their registration with a UK GP and on the UK electoral roll, and the fact that Mr Brooks had retired and no longer had occupational ties to France. The tribunal rejected the couple’s argument that they had moved back to the United Kingdom in 2016 only in the technical sense, and that their only home was still in France. It found that the only reason they spent time in France after 2016 was to maintain the house to enable it to be sold.
The tribunal also ruled that there were no exceptional circumstances that had prevented Mr and Mrs Brooks from bringing their possessions to the UK within the 12-month time limit. The tribunal thought that changes to the customs rules were a direct and foreseeable consequence of Brexit and it did not consider the impact of the coronavirus pandemic to be exceptional either, on the basis almost everyone, everywhere was affected. The couple could have made other arrangements to ensure they brought their personal and household goods to the UK before the deadline, such as putting them into storage in the UK. Although potentially stressful and costly, the tribunal thought this was a normal consequence of selling up and moving home, and not one which could be described as ‘exceptional’ or ‘beyond their control’.
This decision shows that the days of being able to move your residence and possessions back to the UK over an extended period of time, without the risk of customs charges, are over. It is also important to note that the transfer of residence relief rules do not only apply to British people returning to the UK from the EU for Brexit-related reasons. Individuals moving to the UK after living anywhere overseas for an extended period must ensure that their personal effects are imported into the UK within 12 months of them becoming resident here if a liability to customs duty and import VAT is to be avoided. The Brooks case has also shown that HMRC and the courts will not make many allowances for late applications, even if the move has been prompted by significant events such as Brexit or delayed by logistical problems caused by the coronavirus pandemic.