Artists - When to Register for VAT?

Artists - When to Register for VAT?

Didn't find your answer?

I have a client who is an artist, selling his work through a gallery. Between them they establish a selling price and once sold the gallery takes 50% commission.

In the last 12 months the galley has sold 100K of my client's art, taking 50K as commission. The paperwork my client receives shows both the selling price and the commission. For VAT purposes, is my client's turnover for that period 50K or 100K, and if/when he becomes VAT registered,  it's a normal VAT scheme as the margin scheme wouldn't be relevant in this scenario.

Thanks to all who help

Replies (5)

Please login or register to join the discussion.

By mrme89
09th Mar 2012 13:00

I would be tempted to say 100k.

Surely it would be 100k turnover and 50k cost of sales?

 

Im not 100% though, sorry.

Thanks (0)
Replying to petestar1969:
avatar
By mumpin
09th Mar 2012 13:41

I'd say just the net amount...

I've got one at present but he's nowhere near the Vat limit.

I only put through his net income as turnover, ie. what he receives from the gallery.

In the past when working in a larger practice we had one who was under the Vat limit if viewed net but over if viewed gross. We treated her as net and didn't register her for Vat. Had a vat inspection and the vatman was happy with that treatment. I'm afraid i can't point you to any legislation.

Its almost a joint venture really as the gallery owner returns the picture if it doesn't sell after a certain period.

Thanks (0)
By mrme89
09th Mar 2012 13:50
Thanks (0)
avatar
By partner55
09th Mar 2012 14:58

Speak to the gallery!

What you need to do is ask the gallery.

If the gallery is telling HMRC that they are acting as agent for the artist then 100% of the Sales  Sales Price is the artists. And the gallery will declare only their 50% on their VAT return 

If the gallery is telling HMRC that they are acting as principal, and are declaring 100%,  with the 50% to the artist as Purchases then the artist only need include their share.

It goes wrong if the gallery and artists dont talk to each other and are not consistent.

 

 

Thanks (0)
avatar
By spidersong
09th Mar 2012 15:04

Client should be registered

It's a question of supply, who is passing title of the goods to whom.

If the artist owns the goods until they're sold and passes title to the people paying the money, then those people have paid £100K which is above the registration limit.

If the artist has entered a sale or return agreement with the gallery then he's sold the paintings to them for £50K, and they have turnover of £100k from those sales. This is not however the situation I've normally seen, and most galleries are selling on behalf of the artist.

One give away to how the gallery treat it will be if they've charged VAT to the end purchasers, if they have then they're treating the goods as theirs, if they haven't then they probably aren't. Also you could look at whose name they're invoicing in and who takes the risk, if the painting were found to be forgeries or something would the owners have recourse against the gallery or the artisit.

And if this was some kind of joint venture then quite likely the artist and gallery would be looking at registering their partnership for VAT at this stage anyway, since the partnership has taken £100K.

The only way the artist is going to avoid VAT is if the contract with the gallery states that he's selling them his pictures, but if he is then I don't see why the gallery would want to tell him what mark up they make on their purchases.

Sections 22 and 23 of the VAT guide deal with supplies through agents, and may be worth a read.

Thanks (0)