The UK’s First Tier Tribunal (FTT) have recently issued a ruling in favour of the taxpayer that allowed them to continue to import toilet seats duty-free.
The case concerns a business that imported toilet seats from its parent company in the US. The seats, made from 85% wood flour (powder obtained from sawdust) and 15% resin,were marketed as wooden toilet seats.
Initially, HMRC issued Binding Tariff Information (BTI) rulings classifying the products as wood, which carries a 0% duty. HMRC then issued a BTI in 2017 which classified the product as plastic, subject to a 6.5% duty rate. The business requested a BTI ruling review, upheld by HMRC, so they then appealed the decision to the FTT.
Whilst there is a heading for toilet seats, this could not be used to classify the duty rate. This is referred to plastic toilet seats, whereas the one in question was a composite product made of several materials. Therefore there was no real description in the headings of the Combined Nomenclature that could provide assistance. As a result, the FTT had to examine the essential character of the toilet seat.
FTT agreed with HMRC on the essential character of toilet seat. That is that they are
- A rigid object which conforms to a shape appropriate to its use;
- Supports the weight of the person using it; and
- Can be secured to the toilet itself to enable the product to be used safely
If the seat was made entirely of wood without the resin, the seat would have disintegrated the first time someone sat on it. Whereas a toilet seat made entirely of resin could not have been securely screwed in place. The FTT ruled that the ability for a seat to be fastened securely to a toilet was also one of its essential characteristics. As both components were essential, the last heading in the Combined Nomenclature should apply, therefore, the toilet seats were made of wood, and were duty free.
This case highlights the importance of reviewing the classification applied to imported products to ensure your business is not paying a higher rate of duty than required. As the UK is due to leave the EU on 31 October 2019, there will be more transactions than ever, so it will be important for your business to get this right from the outset.
Please contact one of our VAT experts to discuss this further.