Online Art Gallery VAT 2021

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    Hello all, 

    We are building an online art gallery. We mostly offer free services but we do have an option to buy and sell art through our website. We find artists and designers that we like and we offer them to sell their work in our online gallery. We will then charge a commission per art work sold. 

    We aim to ship these artworks and design pieces all over the world, and our artists and collectors will be located in any country too. The business will be registered as a LLC in the UK, so we’d like to know more about the VAT that we are responsible for. 
    Thank you! 
    Trevor S

    There are a number of factors that could potentially impact the VAT treatment of transactions, including:
    • the status of the buyers – are they businesses or public?
    • are the sellers VAT registered?
    • where the buyers/sellers are located
    • your role – are you a principal or agent in the sale?
    • the extent of the services you would provide. E.g. would you collect payment for works? Would you be responsible for arranging shipping?
    • the route taken by goods – would they actually enter the UK?
    • if any of the artwork is digital, would you be treated by HMRC as an online marketplace?
    …and there will be others!

    Also, you mention that your online gallery will “mostly offer free services”. Free services aren’t regarded by HMRC as business activities, potentially preventing the recovery of VAT on related expenditure. You may well need to arrive at some way of apportioning the VAT on your general costs, to allow you to reclaim an amount in respect of your business activity.

    Particularly as you imply the gallery is still in a development phase, I really think it would be beneficial for you to discuss the whole project (not just the art sales element) with a VAT advisor experienced in this area. It’s an ideal time to ensure that everything is set up in the most tax efficient way, and you can get a set of processes agreed and documented. Having gained knowledge of the gallery, the advisor might also be able to help keep you informed of any future changes in VAT rules which may impact.

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