Build-A-Bear Workshop UK Holdings Limited v The Commissioners for HM Revenue and Customs [2021] UKUT 0067 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Mrs Justice Joanna Smith,Judge Ashley Greenbank |
| Neutral Citation | [2021] UKUT 0067 (TCC) |
| Subject Matter | 29 March 2021 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 29 March 2021 |
[2021] UKUT 0067 (TCC)
CUSTOMS DUTIES – classification of accessories for use with dolls and toys under Chapter
95 of the Combined Nomenclature – application of Note 3 to Chapter 95 – meaning of
“suitable for use” and “principally” in Note 3 – effect of Note 3 on scope of subheading 9503
00 29 (parts and accessories of dolls) – application of General Rule of Interpretation 3 –
scope of subheading 9503 00 70 (sets) – burden of proof in customs matters
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
Appeal numbers: UT/2020/0051
UT/2020/0054
BETWEEN
BUILD-A-BEAR WORKSHOP UK HOLDINGS
LIMITED
Appellant
-and-
THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE AND CUSTOMS
Respondents
Sitting in public by way of remote video hearing, treated as taking place in London, on
13 and 14 January 2021
Laurent Sykes QC, instructed by Addleshaw Goddard LLP, for Build-a-Bear Workshop
UK Holdings Limited
Owain Thomas QC and Mr Paul Reynolds, counsel, instructed by the General Counsel
and Solicitor to HM Revenue & Customs, for the Commissioners for Her Majesty’s
Revenue and Customs
© CROWN COPYRIGHT 2021
TRIBUNAL
MRS JUSTICE JOANNA SMITH
JUDGE ASHLEY GREENBANK
2
DECISION
INTRODUCTION
1. This is an appeal by Build-A-Bear Workshop UK Holdings Limited (“BAB”) from a
lengthy and detailed decision (the “FTT Decision”) of the First-tier Tribunal (Judge Harriet
Morgan) (the “FTT”) dated 27 November 2019. The FTT gave permission both for the appeal
and a cross-appeal from the Commissioners for Her Majesty’s Revenue and Customs
(“HMRC”) on 1 June 2020.
2. On 18 October 2012 and 22 July 2013, HMRC upheld the issue of three C18 post-
clearance demands (“C18s”) in respect of customs duty and import VAT on the basis that BAB
had not correctly declared the import of certain goods for the purposes of the Combined
Nomenclature (the “CN”). On 13 July 2015, HMRC upheld a decision to refuse to repay to
BAB customs duties and import VAT in respect of such goods. BAB appealed these decisions
to the FTT. The commercial significance of the appeal, as recorded in paragraph [4] of the
FTT Decision, is that the classifications upheld by HMRC generally attract a customs duty at
4.7%, whereas the classifications for which BAB contends would attract customs duty at 0%.
3. The Build-A-Bear group, of which BAB is the UK arm, is a global retailer of stuffed toys
(in both human and animal form) together with “accessories” for those toys. The issues
between the parties relate to the correct classification for customs duty purposes of various of
the “accessories” imported by BAB.
4. A number of different accessories were in issue at the hearing before the FTT but for the
purposes of this appeal, it is agreed that relevant accessories fall into the following main
categories, (1) clothing; (2) footwear; (3) plastic and textile items; (4) sets; (5) hearts; and (6)
accessories for animal toys. At the beginning of the appeal, an application was made by BAB
to amend its Grounds of Appeal also to include wigs. In circumstances where the issues
relating to wigs are similar to those applicable to clothes in general and where it was accepted
that no prejudice would ensue, HMRC did not seek to resist this application. As the issues
concerning clothing and wigs are similar, we have addressed them together. We refer to the
six categories of accessories identified above, together with the wigs, in this decision notice as
the “Accessories”.
BACKGROUND FACTS
5. The FTT described BAB’s business in paragraph [8] of the FTT Decision as follows:
“BAB offers an experience whereby, at BAB’s “workshops” or online,
customers can choose a “skin” to create their own stuffed toy or doll in the
form of an animal, including bears, or a human (“BAB stuffed animals” and
“BAB stuffed dolls” and together “BAB stuffed toys”). At the workshop
children participate in stuffing the skin, with the assistance from a store
associate, before it is stitched into the finished BAB stuffed toy by a store
associate. As set out below, a textile heart is always inserted into the skin
before it is finally stitched together to form the finished product. BAB also
sell a range of other toys and dolls as set out below. The items are included
within the extensive range of clothing and other “accessories” which BAB
also sells which can be used with BAB stuffed toys and other toys BAB sells.
Customers can purchase the items separately without the need to purchase a
toy”.
6. The Build-A-Bear group’s business was traditionally focussed on toys in the form of
animals, including bears. In 2009, the Build-A-Bear group introduced a “Sweetheart” range of
3
stuffed dolls in human form, branded as “Honey” and “Daisy”. These are rounded in size and
shape and were originally sold in the United States, but sales in the United Kingdom began in
2012. From sometime in 2015 onwards, BAB has also sold (under licence) a range of four
“Lalaloopsy” dolls in a human form.
7. The Accessories in dispute are all sold and used with both stuffed bears (the “BAB
Bears”), and with the Sweetheart and Lalaloopsy dolls (the “BAB Dolls”).
8. In order to accommodate the particular (non-human) features of the BAB Bears, clothes
sold by BAB feature slits (relevant to this appeal are the slits which are formed in the unsealed
sections of the seam of clothing items such as trousers and shorts) which allow the tail of the
bear to be pulled through them, thus permitting the clothing to fit properly. Similarly, wigs
sold by BAB for dressing up a BAB Bear as a special character feature two small loop-holes
of around 10 cms, which allow the protruding ears of a bear to be pulled through so that the
wig sits better on the bear’s head. Various different types of footwear are produced by BAB,
including football boots, walking shoes, slippers and sandals. These all have a rounded
appearance and generally feature BAB’s paw print logo on the tread of the sole.
9. In addition to clothing, wigs and footwear, the Accessories include the textile and plastic
hearts which are inserted into the BAB Bears and the BAB Dolls (“hearts”), sets of clothing
items (including items with slits and/or shoes) (“sets”), scaled down versions of human
accessories such as sunglasses and mobile phones (“plastic and textile items”), and a range of
clothes and other accessories for animal toys such as leashes and collars, plastic animal food
bowls, toy accessories, dog houses, dog beds and pet carriers in a variety of materials (“animal
accessories”). We return to the detail of these items when we address the arguments raised by
the parties on this appeal.
THE LEGAL FRAMEWORK
The Community Customs Code
10. The legal background to the operation of the Community Customs Code (the “Code”)
was set out by the FTT at paragraphs [96]-[107] of the FTT Decision and has been repeated
before us (in terms that we did not understand to be opposed) in an Annex to HMRC’s skeleton
argument.
11. In summary, the customs classification for goods imported from outside the EU is based
on the CN adopted under Article 1 of EC Regulation 2658/1987 (the “Tariff Regulation”).
The CN is derived from the World Customs Organisation’s harmonized system of commodity
nomenclature as laid down by the International Convention on the Harmonized Commodity
Description and Coding System 1983 to which the EU is a party.
12. The Court of Appeal in Invamed Group Limited v Revenue and Customs Commissioners
[2020] EWCA Civ 243 (“Invamed”) per Patten LJ at [5], reproduced as “a convenient summary
of the legal structure of these arrangements” a passage from the judgment of Lawrence Collins
J in Vtech Electronics (UK) plc v Commissioners for Customs & Excise [2003] EWHC Ch 59
(“Vtech”) at paragraphs [6]-[12]:
“[6] The Common Customs Tariff came into existence in 1968. By Article 28
of the revised EC Treaty Common Customs Tariff duties are fixed by the
Council acting on a qualified majority on a proposal from the Commission.
[7] The level of customs duties on goods imported from outside the EC is
determined at Community level on the basis of the Combined Nomenclature
(“CN”) established by art 1 of Council Regulation 2658/1987. The CN is
established on the basis of the World Customs Organisation’s Harmonised
System laid down in the International Convention on the Harmonised
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