Marginal rate of VAT
smudges dad
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Can anyone advise me how this works in a gallery. If a gallery gets 30% commission on a work, is the VAT paid on the whole price or just the 30%, assuming the artist isn't VAT registered?
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Many galleries charge VAT on sales as a matter of course. This is quite wrong. VAT should be charged only when the seller is a person registered for VAT. Many galleries sell work for the artist as the artist's agent, which means that the seller is really the artist and not the gallery. It follows, therefore, that in such circumstances VAT should be charged only when the artist is a person registered for VAT purposes.
Of course, any commission charged to the artist by the gallery for its work as an agent is a VAT-able service and should be charged as such if the gallery is registered for VAT purposes. For example: artist consigns work to gallery to sell as artist's agent for £100 at 30% commission. Artist is not registered for VAT; gallery is registered for VAT. Purchaser pays £100 (no VAT). Gallery takes commission of £30 + £2.40p VAT.
If artist is registered for VAT and so is the gallery, then: Purchaser pays £100 + £8 VAT. Gallery takes commission of £30 + £2.40p VAT. Artist gets £75.60p.
It is, therefore, most important for artists and galleries to clarify their relationship at the outset; whether the gallery is acting as artist's agent or as seller in its own right.
I hasten to add that I'm not a VAT expert - but information can be found here.
http://www.artquest.org.uk/articles/view/vexing-art-toll-1
If both the gallery and artist were VAT registered then there would be two VAT levies; one on the sale price and one on the commission.
The gallery should enquire about your VAT registration status when you begin your relationship with them, and then you should keep them updated should your registration status change.
If an artist is not VAT registered then purchaser's of works sold on a commission basis should not be charged VAT even if the gallery is VAT registered.
(edit: beaten to it.)
I found that article too, but stopped short of directly copying it as the original text is from 1979, so the VAT rates and calculations are no longer correct.
I an glad you dated that because I was getting anxious that 20% VAT on £30 is definitely not £2.40.
cheers
in which case, It's more a matter of administration based on that.
Generally, if you are selling to the public you would not want to charge VAT unless you really had to.
But surely the commission is paid by the artist to the gallery - not by the customer.