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• # 119059
• Tue 15 Sep 2020 01:59 PM

Hi all, 

I'm really looking for a sense check - can anyone assist?

I have just started working for a gallery that is a charity limited by guarantee.  The gallery holds and sells work on behalf of the artist.  When a piece is sold the customer will more times than most pay on card at the point of sale.  A note is then sent to the artist to ask them to invoice the gallery for their work (CoS).  Would you say this is standard practice?

The gallery is VAT registered and therefore I believe VAT should be charged on the whole amount at the point of sale even though the item does not belong to the gallery and they are effectively acting as the agent.  So if the item is £120 then £20 will be the VAT element of the transaction? 

If you have direct experience of working with a gallery, do you have any recommendations for a system that can record stock but also the sell price (VAT element) and discounts offered? 

Many thanks for any assistance. 

Best, Abbie White

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• # 119070
• Thu 17 Sep 2020 09:58 AM

Hi Abbie

I am not an expert in this field but it comes to mind that the VAT margin scheme may be applicable - www.gov.uk/vat-margin-schemes where there is a source of eligible criteria and information on record keeping.

VAT margin schemes tax the difference between what you paid for an item and what you sold it for, rather than the full selling price. You pay VAT at 16.67% (one-sixth) on the difference.

You can choose to use a margin scheme when you sell:

• second-hand goods
• works of art
• antiques
• collectors’ items

You can run the scheme alongside the standard VAT scheme.  

The scheme does not apply to purchases where the supplier/artist charges VAT; under these circumstances then VAT would be accounted for in the normal way.

Hope this helps.

Jane

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• # 119078
• Sun 20 Sep 2020 08:13 AM

Hi Abbie,

I've worked for a commercial art gallery who sell works on behalf of the artists they represent. The artwork is consigned to the gallery by the artist. There is an agreed sale price, and an agreed % share between the two parties. The gallery does not own the artwork. The artworks are on the primary market, ie. it is the first time they are sold.

As you have suggested, the gallery charges VAT on the full sale price to the customer. They then report the sale to the artist and the artist invoices for their share (often 50%, but whatever was previously agreed) of the net sale price. If the artist is VAT registered they apply VAT to their invoice. As you have said, this artist invoice is a cost of sale.

I've personally only seen the margin scheme used in auction houses so do not have much experience with that, there may be a wider use of it for galleries who deal in the secondary market. The gallery I worked for did not use it because they have not bought the artwork from the artist to sell on at a higher price.

A popular database/inventory system used by galleries is called ArtLogic. Artworks are added to the inventory along with a whole wealth of further information, including financial details. Invoices can be produced within the system. It records all sales info to refer to at a later date.

I hope that helps!

Thanks

Kathryn

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