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UK Value Added Tax on (re)-imported Europa

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Richard Lamprey

Joined: 15 Jul 2011
Posts: 95
Location: Kenya

Posted: Sat Apr 20, 2013 1:08 am Post subject: UK Value Added Tax on (re)-imported Europa

In 1995 I exported from UK to Kenya a box of bits kit (Number 168), that eventually became a flying Europa (classic).  



In order to register it properly in Kenya, the Kenya CAA required a letter from UK CAA that this box of bits had never actually been a flying Europa in UK; the UK CAA kindly provided this letter, which I still have.



I have bring this Europa back to UK, for registration in UK, will UK Value Added Tax be payable on it?  Perhaps someone has a similar experience.  Of course the issue of LAA certification would need to be addressed, but lest talk about the VAT first.



Many thanks

Best

Richard

Kenya, Europa classic 168,

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pjlevi(at)gmail.com
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Posted: Sat Apr 20, 2013 4:08 am Post subject: UK Value Added Tax on (re)-imported Europa

On importation you need to claim Outward Processing Relief ("OPR").  The following extract from an HMRC VAT booklet may be of assistance - basically you pay VAT at the point of importation into the EU on the cost of services provided outside the EU by way of modification of the kit that you previously exported and on which VAT was originally paid. I would expect you to have to produce the original invoices with VAT paid on them for the purchase of the Kit from Europa and for the cost of construction services, if any, paid for in Kenya.

    

For the avoidance of doubt, there is a relief called "Returned Goods Relief".  Without going into detail which you can easily find on HMRC's VAT pages, I do not think you qualify for this and I think you should only be looking to obtain OPR to which I will now refer in detail. 

     

If you bought no additional parts and if you did all the assembly work yourself without payments being made to anyone else then you should be able to re-import it VAT-free, by claiming OPR subject only to a possible VAT charge on transportation costs into and out of Kenya.  I doubt whether the latter would apply if you flew the aircraft yourself from Kenya, but there might be a VAT charge on the freight costs of any parts into Kenya.  This assumes you are returning it to the UK as a permanent importation and that you will resume permanent residency in the UK.

     

Two requirements you will see in the extract below may or may not apply, but I would suggest that it would be difficult at this point of time to prove your intentions at the time of departure from the UK, namely: "the goods were temporarily exported from the EU" and "at the time of exportation the goods were intended to be reimported after completion of the treatment or process outside the EU".  

    

You may need to get legal advice on the definition or interpretation of "temporarily exported from the EU".  I would hope that it means exported with the intention to return, but HMRC may well argue that temporary means for a short time.  Your defence to that would be that most Europa kits take several years to be completed by amateur builders, but they may have an argument to deny relief by saying that you completed the build and then used it possibly for several years in Kenya under a Kenya Registration, indicating no intention to return to the UK immediately after "processing".  If the original export was in 1995 then we are talking about claiming that 18 years was a temporary exportation!  However, circumstances change, possibly you left the UK to take up employment in Kenya and the employment lasted longer than originally intended.  You may be able to find a good reason for the extension of the original temporary exportation or the delay in completing the process of building the aircraft.

    

It might also be suggested that your registration of the Aircraft when completed onto the Kenya Register was indicative of an intention to permanently keep it in Kenya.  In my opinion that can be denied by reason of the fact that your intention to return to the UK was always there, only the exact date of your return was not known and at that point of time, as you were residing in Kenya, even though a British Citizen, I assume you had no alternative but to register it on the Kenyan Register.

     

There is an anomaly, namely that the value of a fully-built Europa is these days often significantly less than the original cost of the parts, even ignoring the value of the time spent by the owner/builder, so there is probably no enhancement in value over the amount on which VAT was originally paid and therefore logically there should be no VAT on re-importation.  However, I have no experience on this point except that taxation is rarely logical!  Subject to that comment, it does seem that if you paid for any construction work to be done for you in Kenya or if you imported any parts into Kenya without payment of UK VAT, i.e. as zero-rated exports from the UK/EU, or if you purchased any parts or materials such as instruments from outside the EU and imported them into Kenya, then VAT is payable on the cost of those goods at the time of importation into the UK or EU.

     

The HMRC VAT booklet extract is as follows:

     



6. Goods re imported after process/ repair or replacement (OPR) 

Under Outward Processing Relief it may be possible to obtain relief from customs duties when re-importing Community goods that have previously been exported from the EU for processing or for repair.    

6.1 General 

Import VAT is normally due on the full value of re-imported goods unless relief is available under Regulation 124,125 or 126 of the VAT Regulations 1995.    

6.2 Goods re-imported after process or repair 

You may reduce the amount of import VAT chargeable on goods you import from outside the EU if the goods have been previously exported for process or repair from the UK or any other Member State providing you meet the following conditions:    

•  

the goods were temporarily exported from the EU 

• 

at the time of exportation the goods were intended to be reimported after completion of the treatment or process outside the EU     

• 

the goods are re imported after having undergone repair, process or adaptation outside the EU or having been made up or re-worked outside the EU     

• 

ownership of the goods was not transferred to any other person at exportation or during the time they were outside the EU, and     

• 

a declaration is made at the time of re-importation that the above conditions have been fulfilled.     

Further details can be found in

Notice 235. 

6.3 Calculation of import VAT on goods re-imported after process or repair 

Provided the re-imported goods meet the conditions of paragraph 6.2 above you 

should calculate import VAT on the following value: 

Notice 702/9 VAT: Imports Customs procedures with economic impact and end-use relief 

October 2012 

• 

the price charged for the process, repair or service, including any charge made for parts and materials,     

plus 

• 

any freight and other charges (excluding insurance) paid for the transport of the goods to and from the processor’s premises,     

plus 

• 

any customs or excise duties or other import charges payable in the UK.    

  

You must pay import VAT on the full VAT value of the compensating products unless the conditions for claiming VAT relief are satisfied. 

You may recover the import VAT as input tax, subject to the normal rules (see paragraph 2.12). However, if you are unable to reclaim input tax, for example because you are not registered for VAT, you should contact Customs at the point of importation as soon as you know the goods are to be replaced. If you are not aware of the details until after the goods have been imported you should contact our VAT Helpline on     

0845 010 9000 and ask for Notice 266 and Form C&E 1179.     

6.4 Zero-rated supplies and processes carried out free of charge 

If the process is carried out free of charge, for example because the goods are covered by a warranty, guarantee or service agreement, or where the compensating products are zero-rated in the UK no import VAT will be due on re-importation of the compensating products ......   

 

More information can be found on the following link:

http://www.hmrc.gov.uk/vat/managing/international/imports/opr.htm    

May I stress the importance of the need to meet all of the requirements for Outward Processing Relief in order to avoid a VAT charge on the whole aircraft at importation.  Obviously, if you have the invoices for the purchase of the original kit then that will smooth the processing of your claim.

   



 

Sorry it is a rather lengthy reply, but as you will see it is not straightforward, although at the end of the day I doubt that you will have a problem, although it might be sensible to plan to stay a few days in your arrival port or airport whilst the VAT is sorted out!  I think you will find it much easier arriving by air if you can and obviously at an airport with a good Customs facility based on the airport.  It also helps if everything is arranged with Customs there in advance, so you are expected and you may be able to agree with them in advance the amount of the VAT payable, if any. 

    

I also wonder whether in practice life will be made a bit easier at importation if you are able to change the Registration to a G Reg. before departure from Kenya and have the new Registration letters painted onto the aircraft in Kenya.  I suggest you get advice on that from the CAA or LAA.

     

Regards,

    Philip

    



Philip J. Levi, FCA, CTA(Fellow), TEP, MRIN, ARAeS

    Chartered Accountant, Chartered Tax Advisor.

    G-BWWB, Europa Monowheel Classic, Rotax 912-UL, Airmaster AP332 





E-mail: pjlevi(at)gmail.com (pjlevi(at)gmail.com)  

    





 



On 20 April 2013 10:08, Richard Lamprey <lamprey.richard(at)gmail.com (lamprey.richard(at)gmail.com)> wrote:

[quote]    --> Europa-List message posted by: "Richard Lamprey" <lamprey.richard(at)gmail.com (lamprey.richard(at)gmail.com)>

 

 In 1995 I exported from UK to Kenya a box of bits kit (Number 168), that eventually became a flying Europa (classic).

 

 In order to register it properly in Kenya, the Kenya CAA required a letter from UK CAA that this box of bits had never actually been a flying Europa in UK; the UK CAA kindly provided this letter, which I still have.

 

 I have bring this Europa back to UK, for registration in UK, will UK Value Added Tax be payable on it?  Perhaps someone has a similar experience.  Of course the issue of LAA certification would need to be addressed, but lest talk about the VAT first.

     

 Many thanks

 Best

 Richard

 Kenya, Europa classic 168,

 

 

 

 

 Read this topic online here:

 

 http://forums.matronics.com/viewtopic.php?p=398998#398998

 

 

 

 

 

 

 

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Richard Lamprey

Joined: 15 Jul 2011
Posts: 95
Location: Kenya

Posted: Sun Apr 21, 2013 5:39 am Post subject: Re: UK Value Added Tax on (re)-imported Europa

Dear Philip,



Thank you so much for your very comprehensive reply. 



I have been resident in Kenya many years (since 1973), and so was not domiciled in UK when I bought Europa kit 168 (in 1995).  It was the first complete kit out of the Europa factory, and I paid GBP 19200 for the whole thing (including 912 engine), and it was shipped out of the country VAT-free (ie no VAT paid); ie as a direct export from the factory, although I arranged the transport to Heathrow (where it it was eventually flown out in one long crate in a special large door DC-10). I constructed the whole thing myself, and it flew in June 1999.



I have most of the paperwork of purchase, and in addition, it was a Kenya requirement that a pre-shipment inspection be done.  This was done by the Swiss company Cotecna, who valued the whole kit at the factory at GBP 19500.  Looking back through the records, the duty I would have paid stood at 17%.  



It is beginning to look like I will be asked to pay VAT if/when it comes back in!  I would have the following questions:

1.  Would it be on the purchase value, or on some amount HMRC think it is now worth (maybe more)?  Or depreciated value?

2.  Would this duty be 17%, or the current 20%.?



Philip, thanks again.  Looks like getting it back into UK will be more difficult than getting the kit into Kenya, and flying, and still flying, which I could write a book about.



All best

Richard

Kenya

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Fred Klein

Joined: 26 Mar 2012
Posts: 503

Posted: Sun Apr 21, 2013 8:54 am Post subject: UK Value Added Tax on (re)-imported Europa

On Apr 21, 2013, at 6:39 AM, Richard Lamprey wrote:



 	  Quote: 	
		   


	


 	  Quote: 	
		    Looks like getting it back into UK will be more difficult than getting the kit into Kenya, and flying, and still flying, which I could write a book about.


	


Richard,



Ever since I first heard of your Kenyan Europa I have been amazed at what you've accomplished...in light of your many talents, I'm confident that you will prevail over these latest challenges.



..I hope you find time to write that book,



Fred,



still building

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raimo.toivio(at)rwm.fi
Guest

Posted: Mon Apr 22, 2013 2:24 am Post subject: UK Value Added Tax on (re)-imported Europa

.. the kit into Kenya, and flying, and still 

flying, which I could write a book about.



All best

Richard

Kenya



A book "Building and Operating an Experimental 

Aircraft in Kenya" would be a worlwide success.



Yet another story about miracle completed by an 

individual.



Put me on queue...



Cheers, Raimo

OH-XRT

Finland





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Richard Lamprey

Joined: 15 Jul 2011
Posts: 95
Location: Kenya

Posted: Mon Apr 22, 2013 11:45 pm Post subject: Re: UK Value Added Tax on (re)-imported Europa

Thanks for the encouragement Fred and Raimo.....  



The biggest challenge now is having the plane go through a full annual Certificate of Airworthiness process for certified aircraft, which takes 2 months as a kitplane is never at the top of the pile of CofA applications



Then you get a 'Restricted CofA' that enables you to fly in country, but not outside; they obviously feel that it is perfectly airworthy to fly over Kenya town and countryside, but that it might 'fall down' if it crosses a border.   About 15% of the entire Kenya civil aircraft fleet is under this category, we must be the only 'country-bound experimental fleet' in the world...



Alternative name of book...  Kenya Experimental Aviation, the Fast Track to Divorce...  My wife is an angel to put up with my annual rant..



Best

Richard

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