You may, however, wish to recoup the amount from the seller outside the scheme. Here are the special rules you must follow for any goods which you’ve bought or sold under a margin scheme during the tax period: There’s no requirement to include margin scheme purchases or sales in boxes 8 and 9 of your VAT return. All of us are familiar with the movie version of auctions in which precious works of art are bid upon in elegant rooms, bids of millions of dollars made with the slight raise of a hand. You must issue the buyer with an invoice or other document which includes all these details: To avoid causing the buyer confusion, you should issue separate invoices if you sell goods to the same buyer under both the Auctioneers’ Scheme and normal accounting. If the goods are directly re-exported from Temporary Admission following the auction then you may charge VAT on the buyer’s premium at the zero rate. Subject . If you are in any doubt, you should refer to section 20 at the end of Notice 718: the Margin Scheme and Global Accounting, where we have reproduced the law on eligible goods. They purchased artists of the day including. In other words, it doesn’t become $11,450,000 because of some change in auction house policy. There are also some items which would benefit from an auction arena. A typical auction house invoice is saying say Hammer 300.00 Premium 63.00 Charges 27.17 VAT on charges 5.43 Hammer VAT Nil. It allows you to account for VAT on a margin which is equal to the value of the services you’ve supplied to the seller and the buyer. I work for an auction house that on the sale side will take 10-15% commission. To help us improve GOV.UK, we’d like to know more about your visit today. In most cases, goods which are second-hand in the ordinary usage of the term will be eligible for the margin schemes. Below is an outline of the potential pitfalls of selling in auctions. If you have any feedback about this notice email: customerexperience.indirecttaxes@hmrc.gsi.gov.uk. The total VAT you declare to us on the sale of this item under the Margin Scheme will be the same as it would have been if you had used the Auctioneers’ Scheme in Example 2. For example, if your winning bid is 100 EUR, the commission fee will be 22,50 EUR and the hammer fee will be 8 EUR for a total of 130,50 EUR. A buyer who has dropped out of the bidding cannot be allowed to come back in and resume bidding. But, if you’ve sold an item under the normal VAT rules (that is, you charged VAT on the full selling price), you cannot go back and apply any of the margin schemes to that sale later. You do not have to apply the same option to all your sales. The process of selling Fine Art at auction is the same as the early days. We will explain auction commission charges and UK auction costs including fees and how much it costs in real terms. You can change your cookie settings at any time. You sell the item under the Auctioneers’ Scheme. If the goods are finally imported, or declared for entry to Customs Warehousing or Inward Processing Relief after the auction, you must charge VAT on the buyer’s premium at the standard rate. Many of the leading British auction houses sell licences to the photograph they uses for their catalogues, making more revenue from your painting, long after you sold it!You have normally agreed to this in the small print. We use this information to make the website work as well as possible and improve government services. Generally, you must keep all your business records for VAT purposes for at least 6 years. You pay import VAT at 5% on this value (£25). Not surprisingly, some choose the auctioneer with the lowest commission. While you can change any tradition, however old, … If you’re in any doubt, check the list at the end of Notice 718. So the formula is: commission_amount = sale price * commission_percentage / 100. In other words, if you’re selling several items on behalf of one seller, you must not put the total commission charged to that seller on the invoice for one of the items. Parts of this notice have the force of law under the orders. Not all pictures sell at auction. The tractor changed hands at today’s Cheffins’ Cambridge Vintage Sale at … However, auctioneer commission is only half the picture. This notice is about the Auctioneers’ Scheme, which is a variation on the VAT Margin Scheme for second-hand goods, antiques, works of art and collectors’ items. For individual items realising less than £500 commission is charged at 15%. If you do decide to use one, there are a number of conditions you must meet. You can only use the scheme to account for sales of air guns if you are registered under the Firearms Act 1968. You sell the item under the Auctioneers’ Scheme option for imported works of art, antiques or collectors’ items. However, you must obtain proof of export, as described in Notice 703, when you apply zero rating to the margin. If you want to take up the Auctioneers’ Scheme option in any of these circumstances, you must meet the following conditions: Works of art, antiques, and collectors’ items imported into Great Britain from outside the UK or into Northern Ireland from outside the EU qualify for a reduced rate of import VAT (currently 5%). Notice 700/21: keeping VAT records gives guidance on the general records you must keep if you’re registered for VAT. Sliding Scale – Some Auctioneers And Auction Companies charge a commission that adjusts based upon the price of items. Again, all of this is standard practice within the industry. Other auction houses You normally* pay a buyer's premium (commission fee) of 22,5% incl. The margin you calculate under the scheme may not be the same as your profit margin. Announcements. These additional rules exist so that there’ll be a clear audit trail of the margin you have achieved on each item you’ve sold. Using a margin scheme means that you do not have to account for VAT on the hammer price of the goods. A marketing fee is charged at £10 (plus VAT) per lot. As of this auction, change in commission rules The sales commission is 20% + VAT on the commission only. If you account for the sale under the standard margin scheme, you must show VAT separately on any invoice or statement you issue for charges for your services. Such goods are often entered for relief under Temporary Admission (previously known as Temporary Importation) in order to be sold at auction. the selling price for a vendor who is VAT-registered and is using the Margin Scheme. Tax is also included in the selling process including VAT and import duty. Example: An estate with an automobile in excess of $10,000.00 versus an estate with an older model vehicle valued less then $1,000.00 would not deserve the same commission rate. Yes, auction houses set their own rates and they should be shown on their web sites. Example of vendor’s certificate for goods sold on behalf of non-taxable persons, 7. A sale can depend on many factors. You must not include any other services which you supply to the seller. How the VAT Auctioneers Scheme works and when you may use the scheme to account for VAT on the supplies you make. Jonathan K. Wu wrote about this concept in his article titled Seller Revenue & Sales Commission in 2008. Other wider factors can include the economy, stock market, current bad news, sporting events and even the weather including heatwaves or snow! If we cannot check the margins you’ve declared from your records, VAT will be due on the full selling price of the goods you’ve supplied, even if they were otherwise eligible for the scheme. Read Your Charter to find out what you can expect from HMRC and what we expect from you. The rules about declarations on Auctioneers’ Scheme invoices have changed, see section 4 for details. If you’re in any doubt, check the list at the end of Notice 718. Then it says "if you are registered for VAT this invoice contains 5.43 claimable as VAT input tax". To work out the VAT due on an individual sale, follow the steps in the example: The VAT fraction allows you to calculate the amount of VAT included in … Yes! This means a 25% discount on the commission! VAT also applies to this charge. The auction ends when only one bidder is remaining, and the auctioneer announces the winner. If you choose to do this, you must ensure that each supply can be clearly distinguished. the commission is a VAT-inclusive rate of 12%, that is, 10% plus VAT, buyer’s premium is a VAT-inclusive rate of 18%, that is, 15% plus VAT. Not everything which somebody might collect will be included in the legal definition of a collectors’ item for margin scheme purposes. If the purchase invoice shows a separate VAT amount, the item is not eligible to be sold under the scheme. Date of Sale (to be completed by auctioneer). The sales are liable to VAT in the UK. Don’t include personal or financial information like your National Insurance number or credit card details. If you cannot meet all the conditions, you cannot use the scheme. declare that I am not registered or required to be registered for Value Added Tax and that the goods detailed below are to be sold at auction on my behalf by (auctioneer’s name). The legal definition of an antique is an item, other than a work of art or a collectors’ item, which is over 100 years old. If, after reading this notice, you need any further help or advice, contact our VAT Helpline. The VAT (Special Provisions) Order 1995 (as amended) covers all goods other than cars. Up to 4.95%  + 20% VAT for online bidding. Additional charges at a painting auction: They may also have a discretionary reserve which means that you give them permission to sell goods typically 10%-20% below the reserve price. As the price goes up their commission goes down. Example of an English Auction. You can use the scheme if the goods are eligible and the seller is one of the following: This is a quick guide to the goods which are eligible to be sold under the margin schemes. You’ve accepted all cookies. Flat rate – Many Auctioneers and Auction Companies charge a commission that is a flat rate. You can use a margin scheme for some of your sales and the normal rules for others. Paragraph 3.2 explains which charges can be included in your scheme calculations. If you’ve made any charges which are not included in your scheme calculations, you must: If you’re acting in your own name, the goods you sell are deemed, for VAT purposes, to be both a supply to you and a supply from you. Vendor’s Certificate for goods grown, made or produced and sold at auction on behalf of non-taxable persons. We’ll send you a link to a feedback form. 10% for items selling for $10,000 or more When you calculate the margin under the scheme, you: Section 3 provides full guidance on how to calculate the VAT due under the scheme. You can find further information about those rules in Notice 700: the VAT Guide. We will explain auction commission charges and UK auction costs including fees and how much it costs in real terms. There is an auction for Tiffany Vintage Jewelry at a famous auction house in London. The main ones are: You must calculate the margin in accordance with the rules of the scheme. If VAT is included in the guide price, the rate should be made clear so that consumers are able to calculate the base valuation of the lot: • Guide price £700 + 20% VAT + fees • Guide price £1200 - £1800 (inc. 20% VAT) + fees Where the VAT status of a lot is contested or … Sales made under the Auctioneers’ Scheme from Northern Ireland to EU member states are treated in the same way as sales within the UK. This is determined by reference to the actual sale of the goods at auction. During the 19th Century the market was driven by new collectors and wealthy industrialists. Don’t worry we won’t send you spam or share your email address with anyone. The buyer must be able to establish the sales price for those items which were sold under the Auctioneers’ Scheme. For example, buyer’s premium or other commission, or incidental expenses such as packing, transport and insurance costs. The Auctioneers’ Scheme is a variation on the standard margin scheme for second-hand goods, works of art, antiques and collectors’ items. O’Neal's Auctioneering & Appraisals feels each estate deserves individual attention. To calculate your margin, you subtract the purchase price from the selling price. VAT and a hammer fee of 8 GBP incl. There can be regional differences and like any service some are better than others and they all charge fees! It can take 3-8 months to sell a painting in a specialist auction because the larger auction houses often only have two sales a year with long lead  times. Sample -- Notice of Auction Sale. For full details, including how to claim VAT refunds, please see the VAT & Tax Guide in this Auction Buyer's Guide and on our website ♠ Artist's Resale Royalty (ARR) The laws in certain countries entitle qualifying artists or their estates to a royalty when the artist's works are re-sold for a hammer price of EUR 1,000 or more. You also have to hope that the buyer pays their bill on time at auction, which they don’t always do! If you sell an eligible item, but cannot meet all the record keeping, invoicing and accounting requirements, you cannot use either the Auctioneers’ Scheme or the standard margin scheme. The standard commission charge to the Vendor is 10% for individual items that realise £500 or more. your name, address and VAT registration number, any charges for services made in connection with the sale of the goods (see paragraph 3.2) - you must not show a separate amount of VAT on any of these charges, the amount due from the buyer (this amount will form your selling price, and the purchase price for a buyer who is VAT-registered and is using the Margin Scheme), refer clearly to the original transaction, state that it’s cancelled and that the buyer should amend their VAT account accordingly, box 1 - include the output tax due on all eligible goods sold in the period covered by the return, box 6 - include the full selling price of all eligible goods sold in the period, less any VAT due on the margin, box 7 - include the full purchase price of eligible goods bought in the period, the value of the pawn is greater than £75, a signed certificate from the vendor giving the vendor’s name and address, confirmation that they’re not registered for VAT nor required to be registered for VAT, you must exercise the option for a period of at least 2 years, after which you must inform the, you must use the scheme in respect of all transactions and goods listed in paragraphs 7.1, not just in respect of certain categories of transactions or certain categories of goods, if, having exercised the option, you decide to sell any goods covered by the option outside the scheme (for example, if you export the goods), you’re not entitled to recover any input tax on those goods until the period in which you account for VAT on their sale, re-exported from the UK or re-exported from Northern Ireland to a place outside the EU, declared to another Customs procedure, for example, account for acquisition tax in box 2 of your VAT return, and, not recover the corresponding acquisition tax in box 4 (input tax), the rate of VAT is 20% and the VAT fraction is 1/6. Contact us at info@british-arts.com or 01590 678230. If a formal valuation is not required, most auctioneers will give a verbal valuation on items brought to the saleroom and many conduct regular valuation clinics which are free of charge. One auction house charges £30 after three days,  £100 after ten days and then £10 per day. Check how the new Brexit rules affect you. This means the seller gets the hammer price minus the sales commission. Online commission – for lots sold online, thesaleroom.com charges 4.95% on the hammer price although this fee varies depending on the auction house and type of auction. For businesses in Northern Ireland, If the work of art is an acquisition you should: You must calculate your purchase price in accordance with the rules in paragraph 3.1. So, from that perspective, it would seem, to me at least, that the auctioneer is actually … Equally common in the world of movies, tense bidding back and forth occurs as wealthy and desperate characters seek to outmaneuver each other as the audience in the auction house look on and gasps in suspense. You can find details of import procedures and special arrangements for supplies of temporarily admitted goods in Notice 702: imports. When you sell a horse or pony on behalf of a person who is selling it under the standard margin scheme and is using the 3-part form, they’ll give you parts B (pink) and C (yellow) of the partially-completed form. Most notably, the tractor was bought by an Irish man. On July 23, 2019, the United States District Court for the Middle District of Tennessee ordered that the Tennessee Auctioneer Commission is enjoined and restrained from applying Tennessee’s auctioneering laws and licenses to “electronic” exchanges, or online auction websites. This notice assumes that you have a working knowledge of basic VAT principles, as outlined in Notice 700: the VAT Guide. The Auctioneers’ Scheme option for goods on which VAT has been charged, 8. It’s important to check with the seller whether the goods are eligible for inclusion in the Auctioneers’ Scheme before you auction them. Although you must always keep stock records, you do not have to maintain a stock book which is strictly in accordance with the requirements set out in Notice 718. When you opt to use the Auctioneers’ Scheme for works of art obtained from the creator or their heirs you must not reclaim any VAT charged by the supplier. You must not use the scheme to account for sales of: There is more information about these categories of goods at the end of Notice 718. Website by Tinstar, A brief history shows that the art auction started in England in the late 17th Century with a painting auction recorded in 1693, in London. Adding VAT individually or to a a total cost shouldn't change the final figure - Three sums of £10 with VAT of £2 each comes to £36 the same as £30 plus £6 VAT. We’ve updated the notice to reflect the VAT rate of 20%. The legal definition of works of art includes pictures, paintings, collages and drawings executed by hand by the artist. If so if you reach out directly to the auction house and your solicitor should be able to assist with what is in your purchase contract and what fees are payable. Most carry out valuations for insurance, probate and tax purposes and provide detailed written reports where required. When you’re calculating the amount of VAT due on an individual sale, you must work from the hammer price, as follows: Your purchase price is the hammer price less any commission charges you make to the seller. You must not reclaim the import VAT as input tax, or include it in your Auctioneers’ Scheme calculations. The buyer of your fine art item usually has to pay: British auction houses typically take around 50% out of the deal between you and the buyer! This is so that the seller will be able to reclaim the input tax on those charges. We have moved the information which is relevant to auctioneers who opt to use the Auctioneers’ Scheme into this separate, shorter notice. See Notice 703: exports and removals of goods from the UK for more information. If the 6 year rule causes you serious storage problems or undue expense, then you should consult our VAT Helpline. Many of our clients are looking to avoid the high cost of selling items at auction and so find selling to our specialist gallery a more favourable option. The Auctioneers’ Scheme in particular circumstances, 6. For more information about the special 3 part form for the sale of horses and ponies under the standard margin scheme, see Notice 718. The replacement invoice which you issue to the buyer must: There’s a limit to how long after the due date of the VAT return on which you accounted for the original supply you may issue a replacement invoice. Storage fees if items not collected on time. However, if you do not maintain a stock book, you must retain sufficient alternative records which provide the information required in Notice 718. The accountants from auction houses are NOT transferring sales tax on their premium (or commission) to the state/local coffers…only the sales tax on the hammer price. To calculate the VAT on the sale, you multiply the margin by 1/6 (the VAT fraction). 3.3.1 In any event in which Auction Company is entitled to a Commission pursuant to sub-Section 3.1 above, Auction Once the auction has taken place, the goods are: If imported, the goods qualify for the reduced rate of VAT but the buyer’s premium does not. The costs for selling a house at auction include a commission of 2%+VAT of the final sale price, only paid upon successful sale. If you can meet these conditions, and you’re willing to re-invoice, you must cancel the first entry in your records and cross-refer to the amended transaction. You can recoup the £25 import VAT you had to pay when the item entered the UK from the seller in the USA, but you must not include it in your Auctioneers’ Scheme calculations. I sell prints in a local store that is vat registered on a commission basis ( they get 40%). You may use the Auctioneers’ Scheme to sell the goods on behalf of a pawnbroker if: The 3-part form is a document which can be used to account for VAT on the sale of horses and ponies under the standard margin scheme. You may use the Auctioneers’ Scheme to account for sales of such items by auction, but you must charge VAT on the buyer’s premium at the appropriate rate. These include : pricing, fashion, rarity, condition, quality, provenance. If you sell zero-rated goods, for example antique books, your margin will also be zero-rated. From politicians, business tycoons, film stars and who’s who of the world has turned up for the auction. This amount will form the purchase price for a VAT-registered dealer who’ll be selling the item on using a margin scheme. The item is valued at import at £500. You’ll be able to sell the goods at the zero rate outside the scheme if you can meet the conditions in Notice 703, but your services will normally be standard-rated. The auctioneer who charges a commission or fee, exclusive of VAT, of say, €5,000 in respect of the sale of a house is liable for VAT on thisamount at the standard rate. If you leave the subject blank, this will be … This page has been updated because the Brexit transition period has ended. Tax is also included in the selling process including VAT and import duty. Notice 718: the Margin Scheme and global accounting has more about using the standard margin scheme, and for more general information about margin schemes. When a painting is unsold it is usually listed on worldwide art sales databases as an unsold picture, which can be unhelpful to a future sale as it may put off  future potential buyers. Download (doc, 19.97 KB) × E-mail This Page. This is because the capping rules prevent input tax being claimed on invoices over a particular age. Auctioneers’ Scheme for second-hand goods, works of art, antiques and collectors items. For businesses selling from Northern Ireland the goods will not be subject to acquisition VAT when they are taken into an EU member state, so you should not include them on: See Notice 718 for more detailed information for businesses which use margin schemes about buying and selling to or from the EU. A customer who purchases items in the amount of $ 500 and above or 10 items or more will be eligible for a 15% + commission fee on the commission only. When you sell an item under the scheme, you must issue an invoice to both the buyer and the seller. It is important to match your items value and quality to the correct auction house and market. Do not include any personal or financial information like your VAT number. The retail export scheme allows certain overseas visitors to get a VAT refund on goods they buy and export from Northern Ireland in their personal luggage. Paragraphs which have the force of law are indicated by a statement. An example of typical Auction Fees in London If you’re unhappy with HMRC’s service, contact the person or office you’ve been dealing with and they’ll try to put things right. We’ve included this section to help you understand the effect that different scenarios will have on the total VAT you would owe us for the same transaction. You can use the retail export scheme together with the Auctioneers’ Scheme but, if you do, you must account for VAT on the sale until: You can find more information about the retail export scheme in Notice 704: retail exports. You do not charge buyer’s premium or any other charges to the buyer. If that all appears a bit bewildering, don’t worry, it’s much simpler than it sounds. When you sell a horse or pony on behalf of a person who’s not registered for VAT to a person who is registered, you should complete your name, address and lot number on the reverse of part A (white) of the buyer’s form. Plus an entry fee, although some auctioneers don’t charge for this. This 2004 New Holland TM155 with 11,000 hours on the odometre sold for €19,900 plus VAT and commission. VAT at 20% on that amount gives a total charge for commission of £120. 19 St. Thomas Street, Lymington, Hampshire, SO41 9NB, United Kingdom Phone: +44 (0)1590 678230 | E-mail : info@british-arts.com Company Registration Number: 04670360 (England) | VAT No: 675745490 Privacy Policy and Cookies | Terms & Conditions, © 2020 All text, images and code on this site are copyright of Robert Perera Fine Art Ltd., Artist, Artist’s Estate or relevant copyright owner. For example, buyer’s premium or other commission, or incidental expenses such as packing, transport and insurance costs. If this is the case Robert Perera Fine Art can guide you through the process with their experience and market analysis and recommend an auction house that fits your requirements. Ship it to the auction and wait. There are several variations of the English auction. We may be able to allow you to keep some records for a shorter period. You must obtain proof of export before you can apply zero rating to the sale. There are special rules about how to calculate your buying price, your selling price and your margin under the scheme. Further guidance on how to fill in VAT returns is available in Notice 700/12: how to fill in and submit your VAT Return. If you sell the exported goods under the Margin Scheme, the liability of your services will not follow that of the goods because your services are charged and invoiced outside the scheme. So to confirm have you purchased a property from an auction and that auction has charged a seller fee or has charged you a buyers fee ? The winning buyer p… Example calculations for the Auctioneers’ Scheme, Notice 718: the Margin Scheme and global accounting, calculate the margin in accordance with the rules of the scheme, Notice 718: the Margin Scheme and Global Accounting, Notice 718/1: the Margin Scheme on second-hand cars and other vehicles, Notice 703: exports and removals of goods from the UK, Notice 700/45: how to correct VAT errors and make adjustments or claims, Notice 700/12: how to fill in and submit your VAT Return, customerexperience.indirecttaxes@hmrc.gsi.gov.uk, Postage stamps and philatelic supplies (VAT Notice 701/8), Direct Calculation VAT Retail Schemes (VAT Notice 727/5), Women's sanitary products (VAT Notice 701/18), Bespoke VAT retail schemes (VAT Notice 727/2), Coronavirus (COVID-19): guidance and support, Transparency and freedom of information releases, Commission charged to seller (exclusive of VAT), which goods you can include under the scheme, apply the rules for invoicing as an agent, add the value of your services to the buyer to the hammer price, subtract the value of your services to the seller from the hammer price, the goods must be eligible (see paragraph 2.6), you must have acquired the goods in eligible circumstances, in most cases, this means that you obtained the goods for resale in circumstances where you could not claim any VAT back (see paragraph 2.5), a VAT-registered person supplying goods under the standard margin scheme or Global Accounting, an insurance company selling eligible margin scheme goods which it has acquired as the result of an insurance claim (provided the goods are sold at auction in the same state), a finance house selling eligible margin scheme goods which it has repossessed (provided the goods are sold at auction in the same state), any other charges you make to the buyer for incidental expenses such as packing, transport and insurance costs, services which are a separate supply in their own right, for example, providing illustrations in the auction catalogue, indemnity fees, if an approved insurance company is providing the insurance policy, the charges included in your scheme calculations do not show VAT separately, your invoices clearly show (for the benefit of both seller and buyer) the respective selling and purchase prices they will need for their own scheme calculations, charge VAT on them under the normal rules, can meet the conditions for zero rating in, sell the exported goods under the Auctioneers’ Scheme, you get a refund document stamped by UK or EU customs, seller with an invoice or statement which includes all the details listed below, buyer with an invoice or other document which includes all the details listed below, a means of cross-referencing between the sales system and the stock book, for example, the stock book number, any commission charges you made to the seller (you must not show a separate amount of VAT on these charges), the net amount due to the seller- this amount will form. 3.3 uyer’s Premium. If you use the Auctioneers’ Scheme, there are some additional record keeping rules which apply to your stock record and invoices – paragraphs 4.2 to 4.8 give details. When you calculate your buying and selling prices under the Auctioneers’ Scheme, you must always include: For more information about insurance provided by a third party, see Notice 718. Eu member states are exports, or incidental expenses such as packing, transport insurance. These 2 supplies happen at the same option to all your sales wrote about this have! Who has provided the image made or produced and sold at auction is the same as the of... Commission in an amount equal to six percent ( 6 % ) and! Price * commission_percentage / 100 charge a commission - he/she gets 14 % of. Drawings executed by hand by the artist only 2 minutes to fill in a local store is... Transport and insurance before you can continue using the Auctioneers ’ Scheme invoices have changed, section. 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