Apple fails to remove UK import duty for Apple Watch sport bands

Posted:
in Apple Watch edited March 6
Sport bands for the Apple Watch continue to be a taxable accessory in the United Kingdom, after a tax tribunal ruled the strap should not be exempt from import duty, despite Apple's insistence it is an essential part that allows many of the wearable device's functions to work.




The legal battle between UK tax authority HM Revenue and Customs (HMRC) and Apple relates to how the tax authority classifies the strap of an Apple Watch, compared to the rest of the device. Products entering the UK are usually subjected to import duties ranging between 0 percent and 17 percent, with electronics typically deemed as "duty free" goods that avoid the extra tax.

While the Apple Watch does qualify as duty free, HMRC believed the sports wristband of the Apple Watch isn't a core part of the device, making it an accessory. The Telegraph reports HMRC gave the bands a classification of "other plastic," making it subject to a duty of 6.5 percent.

Apple appealed against this classification with the main argument revolving around certain hardware elements failing to work as designed if the strap is not in use. The heart rate monitoring and fitness tracking functions are hampered when the Apple Watch is not worn on the wrist, due to the need for the sensor on the back to be close to the skin.

The security element is also an issue, as the Apple Watch will check to see if it has been removed from the wrist since the last time the user successfully authenticated themselves. While this impedes access to core functions, this also makes the use of Apple Pay for transactions extremely challenging to users.

Judge Guy Brannon, presiding over the First-tier tax tribunal case, ruled that the "mechanical or electrical functioning of the Apple Watch is not dependent on the band." Noting that a number of functions required skin contact in order to work, there was no evidence to suggest the functions would be disabled if the Apple Watch was held against the wrist or by some other attachment mechanism than the sport band, "however unsatisfactory that may be."

"The Apple Watch is a self-contained, fully functioning electrical machine and the band is not part of that machine."

"The Apple Watch falls into an ever-increasing range of products that fall into the category of wearable technology," said Apple's barrister Stephen Cock. "Such products are specifically designed to be worn by the user in order to provide for a variety of roles. Without the band the Apple Watch cannot be worn and so it cannot fulfill its designed role."

It is noted that the ruling only applies to the plastic sports wristband imported on it's own, not other straps offered for the Apple Watch, and not instances where the Apple Watch is imported with the sports band pre-attached.

It is also unclear if Apple owes any taxes over the matter, as there is no mention in the ruling of whether Apple has continued to pay the duty or decided to withhold it until after the appeal.

Apple vs HMRC Watch Band Tax Tribunal Ruling March 2017 by MalcolmOwen on Scribd

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Comments

  • Reply 1 of 26
    Are regular watch bands taxed separately?  If not, this is a stupid argument by the judge...

    The article fails to mention how other products are taxed.  Does a exercise band (heart rate monitor) get a tax on the band?  Technically it also doesn't need a band to function.
    jbdragonwatto_cobra
  • Reply 2 of 26
    genovellegenovelle Posts: 666member
    Is it a watch ⌚️ without a band. It would just be a portable computer
    coolfactorwatto_cobra
  • Reply 3 of 26
    coolfactorcoolfactor Posts: 1,058member
    They only tax bands that are imported and sold separately from the Apple Watch, so I don't disagree with the judgment. People buy extra bands for the watch, and that's technically "buying an accessory".
    edited March 6 crowleyadm1lightknight
  • Reply 4 of 26
    mike1mike1 Posts: 1,192member
    Are regular watch bands taxed separately?  If not, this is a stupid argument by the judge...

    The article fails to mention how other products are taxed.  Does a exercise band (heart rate monitor) get a tax on the band?  Technically it also doesn't need a band to function.
    Certainly leather and metal bands may be taxed differently or not at all.
  • Reply 5 of 26
    Seems like a real stretch on Apple's part here. The vast majority of items they sell are electronic devices, but the individual wristbands? I trust they won't also go to court to argue that their iPhone cases (without the build-in battery) are electronic devices as well.
  • Reply 6 of 26
    jdgazjdgaz Posts: 128member
    Just means the UK consumers will 6.5% more for accessory bands.
  • Reply 7 of 26
    ekséeksé Posts: 2member
    Must. Pay. No. Pesky. Taxes. 
    brucemcadm1
  • Reply 8 of 26
    Wait i don't understand, if electronics are "duty free" then why UK Apple prices are usually calculated  with tax when you checkout?! ummm lol
  • Reply 9 of 26
    xbitxbit Posts: 131member
    If Apple sold an Apple Watch model without a band, you'd almost see their point. No-one arrives home with an Apple Watch that requires the purchase of a separate sports band though.
  • Reply 10 of 26
    scartartscartart Posts: 158member
    Wait i don't understand, if electronics are "duty free" then why UK Apple prices are usually calculated  with tax when you checkout?! ummm lol
    Electronics are exempt from import duty, they are not exempt from VAT when sold. 
    icoco3jbdragonchiaadm1
  • Reply 11 of 26
    icoco3icoco3 Posts: 1,352member
    Once they are receiving tax on something, governments do not let it go easily.
    jbdragonchiawatto_cobra
  • Reply 12 of 26
    darkvaderdarkvader Posts: 254member
    icoco3 said:
    Once they are receiving tax on something, governments do not let it go easily.

    For some reason, they let go of the import tax on electronics.  Did they put up a fuss about that?

    This is a tax on a luxury item (an extra watch band) that serves no useful function if you don't already own a different luxury item (an Apple Watch).

    I can't think of any reason for it to be exempt.
  • Reply 13 of 26
    crowleycrowley Posts: 5,173member
    They only tax bands that are imported and sold separately from the Apple Watch, so I don't disagree with the judgment. People buy extra bands for the watch, and that's technically "buying an accessory".
    Agree.  Seems totally reasonable.

    Unlike the 0% on electronics.  Wtf is that all about?
    randominternetperson
  • Reply 14 of 26
    steven n.steven n. Posts: 864member
    They only tax bands that are imported and sold separately from the Apple Watch, so I don't disagree with the judgment. People buy extra bands for the watch, and that's technically "buying an accessory".
    I agree:
    "It is noted that the ruling only applies to the plastic sports wristband imported on it's own, not other straps offered for the Apple Watch, and not instances where the Apple Watch is imported with the sports band pre-attached."

    This is an important distinction. You get 1 band duty free is how I read this. The others are accessories.
  • Reply 15 of 26
    The judge saw through Apple's ruse. However, he contradicts himself if he lets other watch bands slide by without an import tax.
  • Reply 16 of 26
    "Wait i don't understand, if electronics are "duty free" then why UK Apple prices are usually calculated with tax when you checkout?! ummm lol " I think you may be thinking of a different tax. Import taxes are levied on imports, probably at the point of wholesale import. The manufacturer pays that tax. The tax we see as consumers is whatever the local government levies, such as a VAT or sales tax.
  • Reply 17 of 26
    This only seems odd because it applies only to the sports band, and not say any of the other bands apple imports for the watch. It seems correct that Apple would move to harmonise the duty taxes across their bands.
  • Reply 18 of 26
    lukeilukei Posts: 223member
    Wait i don't understand, if electronics are "duty free" then why UK Apple prices are usually calculated  with tax when you checkout?! ummm lol
    Because that is sales tax (VAT) not import duty
  • Reply 19 of 26
    adamcadamc Posts: 544member
    Seems like a real stretch on Apple's part here. The vast majority of items they sell are electronic devices, but the individual wristbands? I trust they won't also go to court to argue that their iPhone cases (without the build-in battery) are electronic devices as well.
    I think you missed out this part and not that you don't understand - "It is noted that the ruling only applies to the plastic sports wristband imported on it's own, not other straps offered for the Apple Watch, and not instances where the Apple Watch is imported with the sports band pre-attached."
  • Reply 20 of 26
    Rayz2016Rayz2016 Posts: 1,694member
    adamc said:
    Seems like a real stretch on Apple's part here. The vast majority of items they sell are electronic devices, but the individual wristbands? I trust they won't also go to court to argue that their iPhone cases (without the build-in battery) are electronic devices as well.
    I think you missed out this part and not that you don't understand - "It is noted that the ruling only applies to the plastic sports wristband imported on it's own, not other straps offered for the Apple Watch, and not instances where the Apple Watch is imported with the sports band pre-attached."
    So what's so special about the plastic sports band?
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