The legal and business situation discussed in the 1979 article posted in the Artlaw Archive has been overtaken by many and various events over the past 36 years, and especially Directives on VAT introduced by the EU in 1999, and enacted into UK VAT Regulations soon thereafter. In particular, the new VAT Directive and Regulations harmonised VAT laws throughout the EU Member States, who were allowed a limited amount of discretion to set their own VAT rates.

A key feature of the EU-wide VAT legal framework is the introduction of the Margin Scheme: this allows sellers of art to charge VAT on the margin of profit made on any sale, whether or not they are VAT-registered; and allows agents/dealers/auction houses selling art on behalf of owners to charge VAT only on commission charged to sellers and/or buyers, rather than on the purchase/selling price.

In other words the Margin Scheme is intended to ease the VAT burden on sellers of art and their agents, partly because often art is sold second hand; and/or partly to create a level playing field for professional agents/dealers/auction houses each of whom is always VAT-registered, compared with sellers who are not art market professionals and unlikely to be VAT-registered.

All in all the EU and UK VAT framework for art sales is now extremely complex and varied (and certainly compared with VAT’s infancy in 1979). HMRC has published guidance on the workings of the VAT Margin Scheme, which the questioner should find useful.

As a starting point see:

For more details and working examples, see:

This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.