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Art Gallery VAT

Art Gallery VAT

We have a client who operates an art gallery. They display the artwork in th UK and sell them on behalf of artist from all over the world. When the "consumer" is invoiced it is done in the name of our client (not the artist) so I'm thinking our gallery is an "undisclosed agent"

I've been reading the VAT Notice (sections 22 onwards). According to section 24 we need to apply the revised VAT treatment which means we have to account for acquisition tax etc.

Can someone please confirm my understanding or if I've got it wrong, could clarify the position?

Example:

Gallery sells a painting done by an artist in the Member State

Art gallery sells painting for £10,000 + VAT.
Gallery keeps 50% commission (so £5000 + VAT)
Artist is sent the balance of £6000

On the VAT return we would show therefore

Box 1 £2000
Box 2 £1000
Box 3 £3000
Box 4 £1000
Box 5 £2000
Box 6 £10000
Box 7 £5000
Box 8 NIL
Box 9 £5000

Replies

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30th Oct 2012 18:30

Your assumptions and calculation are correct!!

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01st Nov 2012 13:23

Look up the Margin Sheme for Secondhand Articles, Antiques & Art works. You may find it is better to register for that as you will probably not pay VAT on all your purchases for resale.

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01st Nov 2012 13:39

These aren't second hand works of Art

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to Rakeem
01st Nov 2012 23:33

Art Gallery VAT

They don't have to be second hand. They are works of art and are covered by the same margin scheme.

VAT margin schemes for second-hand goods, art, antiques etc

Normally you charge VAT on your sales, and reclaim VAT on your purchases. However, if you sell second-hand goods, works of art, antiques or collectibles, there may have been no VAT for you to reclaim when you bought them. You may be able to use a VAT margin scheme. This enables you to account for VAT only on the difference between the price you paid for an item and the price at which you sell it - your margin. You won't pay any VAT if you don't make a profit on a deal. You can still use standard VAT accounting for other sales and purchases such as overheads.

When you can and cannot use the margin schemesWhen you can use a margin scheme

You can use a margin scheme if you trade in eligible goods that you've bought under eligible circumstances, for example from businesses or individuals who are not registered for VAT, or from businesses selling under the scheme.

'Eligible goods' include the following:

Second-hand goods. Goods that can still be used, or which could be used after repair. They include most goods that are commonly called 'second hand' and include motor cars - but not vehicles sold for scrap or parts.Works of art. Pictures, paintings, collages, drawings and other works created and generally signed by the artist. Most items that would normally be described as 'works of art' would be eligible, although there are exclusions such as technical drawings, scenery for theatres and hand-decorated manufactured items.Antiques and collectors' items. Antiques are goods that are over 100 years old. Collectors' items are stamps, coins and currency and other pieces of scientific, historical or archaeological interest. Not all goods that can be collected are eligible under the scheme.

More about eligible and ineligible goods and circumstances in VAT Notice 718

 

Hope this helps.

 

 

 

 

 

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02nd Nov 2012 09:22

Thanks to you both for your replies.

Jacqui that is helpful for advice going forward. I'll have a read.

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to the_fishmonger
02nd Nov 2012 13:01

MARGIN SCHEME

I have a lot of experience here as have been FC of a private gallery & VAT consultant, now VAT specialist to an Auction House so feel free to ask any questions.

Best wishes.

Jacqui

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By LILYA
to JacquiMBurns
19th Oct 2016 23:14

Dear Jacqui, I am sorry to bother you but if you have got a minute I would SO MUCH appreciate your advice! I have been shortlisted for a bookkeeping job in a gallery, although I do not have any previous experience (I am an ordinary practice accountant and am familiar with bookkeeping for limited companies, mainly construction). I already looked thoroughly into marginal VAT, but still no experience with accounting/bookkeeping for a gallery! My second interview is in three weeks. Could you kindly advice on what accounting software is usually used in galleries? And I would be hugely grateful for any tips!!!

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to LILYA
21st Oct 2016 01:03

Well I have used Sage line 50 at 2 art galleries including installing & customizing it as appropriate.
The auction house used JD Edwards as it fitted in with what the American side was doing. Personally I don't recommend it as it is not really set up for UK Vat & is cumbersome.
There are a number of gallery specific packages to deal with the actual art info.
I personally set up templates outside Sage for the actual invoices as I could then issue them in the appropriate currencies and would just need to change the purchaser & art details.
Good luck with the interview. If you don't get it, let me know so I can apply (lol) as I am currently doing consultancy work for a practice & am missing the art world!

Best wishes
Jacqui

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to JacquiMBurns
04th Jan 2017 16:47

Dear Jacqui, you seem to be an expert. We have been in the art trade for a long time and have never had a clear answer from our accountants on this issue, please can you help. we buy a lot of work from Europe from artists, who don't charge us vat on the invoice. Sometimes we receive the work on consignment again the invoice on sold work doesn't show tax. Can we use the margin scheme on this artwork and can we back date sales which we have not used this on?

regards

Martin

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to JacquiMBurns
07th Mar 2017 10:08

Hi Jacqui,

If the gallery is acting as an undisclosed agent for a VAT registered principal, who didn't pay VAT on the purchase of a painting. Is it possible to claim the margin scheme? If so how does the undisclosed agent account for the VAT, is it as if the agent has made a sale under the margin scheme and they account to HMRC for the output tax and no input?

Any advice gratefully received

J

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to JacquiMBurns
07th Mar 2017 10:08

Hi Jacqui,

If the gallery is acting as an undisclosed agent for a VAT registered principal, who didn't pay VAT on the purchase of a painting. Is it possible to claim the margin scheme? If so how does the undisclosed agent account for the VAT, is it as if the agent has made a sale under the margin scheme and they account to HMRC for the output tax and no input?

Any advice gratefully received

J

Thanks (0)
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to JacquiMBurns
07th Mar 2017 10:08

Hi Jacqui,

If the gallery is acting as an undisclosed agent for a VAT registered principal, who didn't pay VAT on the purchase of a painting. Is it possible to claim the margin scheme? If so how does the undisclosed agent account for the VAT, is it as if the agent has made a sale under the margin scheme and they account to HMRC for the output tax and no input?

Any advice gratefully received

J

Thanks (0)
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to JacquiMBurns
07th Mar 2017 10:08

Hi Jacqui,

If the gallery is acting as an undisclosed agent for a VAT registered principal, who didn't pay VAT on the purchase of a painting. Is it possible to claim the margin scheme? If so how does the undisclosed agent account for the VAT, is it as if the agent has made a sale under the margin scheme and they account to HMRC for the output tax and no input?

Any advice gratefully received

J

Thanks (0)
avatar
to JacquiMBurns
07th Mar 2017 10:08

Hi Jacqui,

If the gallery is acting as an undisclosed agent for a VAT registered principal, who didn't pay VAT on the purchase of a painting. Is it possible to claim the margin scheme? If so how does the undisclosed agent account for the VAT, is it as if the agent has made a sale under the margin scheme and they account to HMRC for the output tax and no input?

Any advice gratefully received

J

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