Society of Equestrian Artists - "Talk about Art!"

Sarah · 2009-10-07 00:41:25

Has anyone else had experience of how vat works when a gallery is selling your work on a commission basis? There seems to be two different ways of working out the wall price according to whether the artist is vat registered or not and whether the gallery charges vat to the seller...

Basically I have been invited to exhibit at a certain gallery and they are saying 'we take 45% + VAT off the wall price as our commission, so you need to take this into account when indicating your prices'.

Does this mean the vat only applies to the commission element of the full selling price (ie 15% of the 45%), or does it effectively mean they will take 60% off the selling price altogether... I'm not vat registered so I assume that strictly speaking they shouldn't charge vat on the whole thing, whether THEY are registered or not?! I will check this out with them of course, but would rather not appear completely clueless as it's a fairly prestigious gallery!

Totally confused - can anyone shed any light on this?

Katy · 2009-10-07 08:32:52

I'd assume that meant they were taking 45% + vat on the 45% eg. 45 x 1.15 = 51.75%
(till vat goes back up to 17.5%)

If the gallery is mainly dealing with originals on a sale or return basis, they should use that system and only apply the VAT to the service they are providing you by selling the painting....

If gallery actually buys in a lot of work or mainly sells prints though, they might apply the VAT on the whole lot - one dealer I work with does that and I've not yet managed to convince him he shouldn't have to on SoR works.

If they were applying VAT to whole thing you should technically divide the wall price by 1.15 to get to the EX VAT price to be split between you and gallery - so if thing sold at £1150 the VAT would be £150 and the remaining £1000 split £550 to you and £450 to gallery - which isn't the same as 60/40 split of £1150 ! - have seen some fairly inspired miss use of % calculations by galleries in the past though....

To be safe if you're worried about it just ask them to confirm, say if you sold something with a wall price of £1000 what you would get....

mersonh · 2009-10-07 08:56:26

Katy is completely right

Vat is a tax based on the amount of value that a supplier is perceived to add. Therefore for a £100 picture, the artist is presumed to have added value of £55 whilst the gallery adds value of £45. The actual amounts paid will depend on the vat status of both the artist and the gallery.

For a £100 picture it would be advisable to have a wall price including vat ie £115. Then if the gallery charges 45% commission they will take £51.75 (assuming they are vat registered) of which £6.75 will be paid to HMRC. The artist would be left with £63.25.

If the artist is vat registered they will be required to pay over £15.00 in output vat in total, however they would be able to offset the input vat on the commission of £6.75 making a net vat payment of £8.25.

If the artist is not vat registered they do not have to worry about vat and can simply pocket the £63.25.

I am not sure whether there are special rules for art (having no experience of it!) but that is how a normal transaction would work.

But I would do as Katy suggests and ask the gallery to confirm how much you would receive on a certain wall price. Then you can make sure they are calculating it correctly. It does get complicated!

Sarah · 2009-10-07 09:05:41

Many thanks both of you! It is, as Katy says, a gallery that only deals in originals, on a sale or return basis. I will check with them as you suggest on a sample price but am also hoping for guidance from them as to wall prices. Bit of a different kettle of fish to what I am used to and they know their market best...

It is complicated though, isn't it?!

Society of Equestrian Artists - "Talk about Art!"

Announcement

#1 2009-10-07 00:41:25

gallery commission and vat

#2 2009-10-07 08:32:52

Re: gallery commission and vat

#3 2009-10-07 08:56:26

Re: gallery commission and vat

#4 2009-10-07 09:05:41

Re: gallery commission and vat

Board footer