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The VAT and Duties Tribunal gave its ruling in a case involving art dealership Haunch of Venison, who faced hugely inflated VAT bills for works of art that Her Majesty’s Revenue and Customs (HMRC) classified as “electrical devices” for import purposes.

Pierre Valentin, a partner in law firm Withers LLC, who represented Haunch of Venison, explained how the dispute with HMRC began after the dealers imported contemporary artworks by US video installation artist Bill Viola into the UK, and signalled their intention to import a light sculpture by the US minimalist artist, Dan Flavin.

Sculptures are charged upon importation in the UK at a reduced rate of five per cent and are not liable for customs duties.

HM Revenue & Customs argued that relevant import category for these works was “electrical devices” which covers “image projectors” and “lamps and light fittings” and hence that they would be subject to both customs duty and the full rate of VAT (currently 15 per cent).

But then HMRC appeared to contradict themselves because they argued that VAT and customs duty were payable on the full value of the installations (declared by Haunch of Venison at the time of import) as works of art, as opposed to the far lower value of the component electrical parts.

Expert witnesses at the hearing included Sandy Nairne, director of the National Portrait Gallery, Martin Caiger-Smith, independent art critic and curator, and Robert Cumming, writer and art critic.

They gave evidence in support of the gallery and explained why Viola and Flavin’s work should be regarded as sculpture.

The US tax authorities have also confirmed that they would treat these works as sculpture if imported into the USA.

Calling the ruling “a landmark decision with significant ramifications for the international art market”, Mr Valentin told ATG: “We are delighted that the VAT and Duties Tribunal has ruled in favour of Haunch of Venison. The Tribunal has acknowledged that the meaning of sculpture has expanded considerably during the 20th and 21st centuries to encompass novel art forms including video installations.

“The decision will be of particular comfort to UK collectors and commercial galleries. An unfavourable decision would have had negative consequences for the British art market by discouraging the importation of important works of contemporary art into the UK.”

By Ivan Macquisten