Guest Poster Mallory Wood from Accordance International VAT Compliance discusses some important VAT issues facing artists and art businesses when selling art across international borders.
VAT compliance issues to consider when your business buys & sells art
Art is a unique type of business because more art dealers, unlike people in other industries, are in a position of both buying and selling. This means extra rules to learn and compliance issues that may crop up. Here are a few of the main points to know about when buying and selling art, both in the UK, within the EU and outside of the EU.
When purchasing art from a UK art dealer, you will be charged UK VAT at the applicable rate and you will be able to reclaim the VAT through your UK VAT return but if the art dealer that you purchase the art through is from outside the UK (but within the EU), as long as they provide their UK VAT number then VAT should not be applied.
VAT should also not be applied if the art comes from outside the EU but you will have to account for the import VAT and customs duty which may vary depending on where the art comes from.
Selling to businesses
When you sell to businesses in the UK, you should charge UK VAT to the purchaser. However under Article 138 of the EU Vat Directive, when you sell art to customers outside of the UK but established within the EU, VAT should generally not be charges and you should provide the customer with the EU Member State VAT number (the number that relates to where the customer is based) displayed on the invoice and you will need to obtain proof that the goods have left the UK.
You will also have to meet the compliance obligations that come with moving goods cross-border, such as intrastat reports. When sales of art are made to business customers located outside the EU, no UK VAT needs to be charged but you must obtain the appropriate evidence to prove the sale.
Selling to private individuals
In the UK, as a domestic supply UK VAT is chargeable at the applicable rate. If goods are sold to private individuals in other UK Member States by a UK business then UK VAT should still be charged but the dealer should be aware of the distance selling thresholds because they will have to register when they cross them.
If a company re-sells art (therefore the art is classed as second hand) then it may be worth looking into the VAT Margin Scheme. This is where an art dealer buys a piece of art with no VAT on the purchase price, meaning that when the art is re-sold on, VAT need only be accounted for on the profit margin of the resale price.
You must be aware of the strict rules, set out by HMRC, which dictate what the profit margin is and you must keep all the correct records to be able to prove how you are handling the VAT treatment, in order to prove your compliance and to avoid fines and penalties.
Mallory Wood is Digital Marketing Manager at Accordance. Accordance was founded in response to Europe’s rapidly changing VAT situation with the aim to simplify the experience of cross-border VAT for businesses trading in Europe through a policy of practical engagement with clients and their indirect tax issues.
Accordance greatly supports figurative art and are fresh from sponsoring Shock of the Old – an exhibition featuring local Brighton artists.
Image released under creative commons by Kevin Dooley