The cost of the auction house staff + VAT is being passed on to you, the buyer in the form of a buyer’s premium. Because these 2 supplies happen at the same time, they share a common tax point. There are times when auctions are useful particularly if you cannot find a direct buyer for your item. 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. The item you are selling is for export outside the UK or, for businesses in Northern Ireland exported outside the EU. You’ll have to pay VAT on the hammer price as well as on your services to the vendor and the purchaser under the normal VAT rules for undisclosed agents. If you leave the subject blank, this will be … For example, buyer’s premium or other commission, or incidental expenses such as packing, transport and insurance costs. There are special rules about how to calculate your buying price, your selling price and your margin under the scheme. They often charge storage if you do not collect you item on time. Contact us at info@british-arts.com or 01590 678230. Most notably, the tractor was bought by an Irish man. Your selling price is the hammer price plus any charges for services you make to the buyer. You pay import VAT at 5% on this value (£25). 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. (£30 + £20 = £50.). Notice 718: the Margin Scheme and global accounting has more about using the standard margin scheme, and for more general information about margin schemes. You must calculate your purchase price in accordance with the rules in paragraph 3.1. Christie’s charges a single Seller’s Commission rate for the services we provide. An example calculation: a blue widget is sold for $70. These include : pricing, fashion, rarity, condition, quality, provenance. 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. in a week time from the auction. Your purchase price under the standard margin scheme option will be the hammer price only. It’s important to check with the seller whether the goods are eligible for inclusion in the Auctioneers’ Scheme before you auction them. You can use a margin scheme for some of your sales and the normal rules for others. The tax point for both supplies will be the earlier of you: Under the Auctioneers’ Scheme, a margin is created from the supply of services made to the seller and the buyer. If a buyer wants to drop out of the auction, he must signal the auctioneer. We have moved the information which is relevant to auctioneers who opt to use the Auctioneers’ Scheme into this separate, shorter notice. This clean example of a 1996 Ford New Holland 7740 with 8,500 hours on the clock sold for €18,500 plus commission (no VAT). When you calculate the margin under the scheme, you: Section 3 provides full guidance on how to calculate the VAT due under the scheme. Up to 4.95%  + 20% VAT for online bidding. You sell zero-rated goods (such as antique books) under the Auctioneers’ Scheme. Currently they process the payments through their tills and are taking 20% out of the sale before calculating their commission. 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. If the purchase invoice shows a separate VAT amount, the item is not eligible to be sold under the scheme. 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. 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. 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. So, from that perspective, it would seem, to me at least, that the auctioneer is actually … I sell prints in a local store that is vat registered on a commission basis ( they get 40%). 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! 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. If you have any feedback about this notice email: customerexperience.indirecttaxes@hmrc.gsi.gov.uk. 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. 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. The item is valued at import at £500. Again, all of this is standard practice within the industry. Using a margin scheme means that you do not have to account for VAT on the hammer price of the goods. O’Neal's Auctioneering & Appraisals feels each estate deserves individual attention. An example of typical Auction Fees in London For the special rules about the legal definition of a second-hand motor vehicle, see Notice 718/1: the Margin Scheme on second-hand cars and other vehicles. 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. When you obtain goods which have had VAT charged on their full value, they’re not normally eligible for the Auctioneers’ Scheme. Subject . If you’re in any doubt, check the list at the end of Notice 718. You may, however, wish to recoup the amount from the seller outside the scheme. If you choose to do this, you must ensure that each supply can be clearly distinguished. There are detailed examples of calculations in section 8. From politicians, business tycoons, film stars and who’s who of the world has turned up for the auction. You can only use the scheme to account for sales of air guns if you are registered under the Firearms Act 1968. Jonathan K. Wu wrote about this concept in his article titled Seller Revenue & Sales Commission in 2008. We may be able to allow you to keep some records for a shorter period. A valuation fee is charged but may be waived if the items are later sold with the same auctioneer. 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. To convert amounts into foreign currencies you must use one of the methods outlined in Notice 700: the VAT Guide. Vendor’s Certificate for goods grown, made or produced and sold at auction on behalf of non-taxable persons. A sale can depend on many factors. 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. The most common variation is the English Clock Auction where the auction starts at a low price and begins to rise gradually with each bid placed by the prospective buyers. Tax is also included in the selling process including VAT and import duty. You’ll need to include the full title of this notice. I work for an auction house that on the sale side will take 10-15% commission. We use cookies to collect information about how you use GOV.UK. As explained in paragraph 2.2, you calculate your margin by taking into account charges for the services you make to the seller and the buyer. 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. The Auctioneers’ Scheme in particular circumstances, 6. Tax is also included in the selling process including VAT and import duty. The creator, or their heir, will have to account for output tax on the full hammer price, so they may ask you to sell the item under the option for the standard margin scheme (see Notice 718), rather than the Auctioneers’ Scheme. If, after reading this notice, you need any further help or advice, contact our VAT Helpline. There are several variations of the English auction. We will explain auction commission charges and UK auction costs including fees and how much it costs in real terms. 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%). 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. 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 … If you issue an invoice under the Auctioneers’ Scheme in a foreign currency, including the euro, you must show the sterling equivalent for each element of the supply. Example of an English Auction. You must not include any other services which you supply to the seller. For up-to-date information about the capping time limits, see Notice 700/45: how to correct VAT errors and make adjustments or claims. 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 ? This means the seller gets the hammer price minus the sales commission. When you sell an item under the scheme, you must issue an invoice to both the buyer and the seller. This amount will form the purchase price for a VAT-registered dealer who’ll be selling the item on using a margin scheme. We’ll send you a link to a feedback form. 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. The standard commission charge to the Vendor is 10% for individual items that realise £500 or more. If, for example, the reservation price of the second-highest bidder is $11,365,000 (consisting of a ‘price’ of $10 million and a auction house premium of $1,365,000), that amount does not change with an increase in the rate of the buyers premium. 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. 40% on all items plus labor, marketing, etc. 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. 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 obtain proof of export before you can apply zero rating to the sale. 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. We use this information to make the website work as well as possible and improve government services. You must issue the seller with an invoice or statement which includes all these details: If either the seller or the buyer is using a margin scheme, their respective selling and purchase prices must be clear from the invoices you issue. Plus an entry fee, although some auctioneers don’t charge for this. Commission in an amount equal to six percent (6%) of the total sale price of the Property, payable at closing. Not surprisingly, some choose the auctioneer with the lowest commission. It’s important that you keep to these rules so that you can continue using the Auctioneers’ Scheme. If you’re still unhappy, find out how to complain to HMRC. This means that you should allocate any charges included under the scheme against each separate lot. 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. A marketing fee is charged at £10 (plus VAT) per lot. There is a £3.00 lotting fee for each lot entered into the sale. See Notice 703: exports and removals of goods from the UK for more information. 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. You can find details of import procedures and special arrangements for supplies of temporarily admitted goods in Notice 702: imports. You sell the item under the Auctioneers’ Scheme. This is so that the seller will be able to reclaim the input tax on those charges. 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. Fees can be substantial for both buyers and sellers. This notice is about the Auctioneers’ Scheme. 3.3 uyer’s Premium. Not everything which somebody might collect will be included in the legal definition of a collectors’ item for margin scheme purposes. Auctioneers spend much of their working lives assessing the value of possessions. 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. 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. 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. CORONAVIRUS (COVID-19) - We are still buying pictures as usual at Robert Perera Fine Art during this challenging time. 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. An Extra Statutory Class Concession, introduced with effect from 1 January 1999, allows the Auctioneers’ Scheme to be used for the sale of all goods grown, made or produced (including bloodstock or livestock reared from birth) by non-taxable persons. There is also a loss/liability charge of 1.5% (plus VAT… 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. VAT and a hammer fee of 8 GBP incl. 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. 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. To calculate your margin, you subtract the purchase price from the selling price. Auctioneers’ Scheme for second-hand goods, works of art, antiques and collectors items. Flat rate – Many Auctioneers and Auction Companies charge a commission that is a flat rate. I am not vat registered. For example, the hammer price of the goods, the amount of commission, other charges due – and not just for the total value of the sale. This rate includes marketing costs and insurance cover (except for Wine sales, where marketing and insurance are charged separately). Sales made under the Auctioneers’ Scheme from Northern Ireland to EU member states are treated in the same way as sales within the UK. The 3-part forms come in numbered sets, with a VAT summary sheet at the back. 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. For more information about the special 3 part form for the sale of horses and ponies under the standard margin scheme, see Notice 718. Generally, you must keep all your business records for VAT purposes for at least 6 years. So the formula is: commission_amount = sale price * commission_percentage / 100. 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. 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. Notice 700/21: keeping VAT records gives guidance on the general records you must keep if you’re registered for VAT. 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). However, if you do not maintain a stock book, you must retain sufficient alternative records which provide the information required in Notice 718. If you’re in any doubt, check the list at the end of Notice 718. 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 … 3.3.1 In any event in which Auction Company is entitled to a Commission pursuant to sub-Section 3.1 above, Auction During the 19th Century the market was driven by new collectors and wealthy industrialists. If you do decide to use one, there are a number of conditions you must meet. If you’ve sold goods under the Auctioneers’ Scheme, and the buyer subsequently decides that they wish to treat the transaction outside the scheme, preferring to pay VAT separately on the hammer price and other charges, you may re-invoice for the transaction under the normal VAT rules. If you sell zero-rated goods, for example antique books, your margin will also be zero-rated. Paragraph 3.2 explains which charges can be included in your scheme calculations. The buyer must be able to establish the sales price for those items which were sold under the Auctioneers’ Scheme. At the end of each tax period you’ll need to fill in a VAT return. Don’t worry we won’t send you spam or share your email address with anyone. Ship it to the auction and wait. Do not include any personal or financial information like your VAT number. The Auctioneers’ Scheme option for goods on which VAT has been charged, 8. It will take only 2 minutes to fill in. These services are not separately charged with VAT. 10% for items selling for $10,000 or more There is an auction for Tiffany Vintage Jewelry at a famous auction house in London. Pay attention! Look on the back of fine art greetings cards and see who has provided the image. This 2004 New Holland TM155 with 11,000 hours on the odometre sold for €19,900 plus VAT and commission. The VAT (Special Provisions) Order 1995 (as amended) covers all goods other than cars. So if a property sells for £200,000 the commission payable to the auctioneer would be £4,000 + VAT. Such goods are often entered for relief under Temporary Admission (previously known as Temporary Importation) in order to be sold at auction. There are also some items which would benefit from an auction arena. You must not reclaim the import VAT as input tax, or include it in your Auctioneers’ Scheme calculations. Catalogues, as today, were published before the sale date. Using the figures from this example, the commission to the seller is £100. The auction ends when only one bidder is remaining, and the auctioneer announces the winner. This is determined by reference to the actual sale of the goods at auction. 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. 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 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. 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. If the 6 year rule causes you serious storage problems or undue expense, then you should consult our VAT Helpline. If your property sells at auction, you will receive a notification informing you of the hammer price - the winning bid for a lot at auction - that your item achieved. Yes! the selling price for a vendor who is VAT-registered and is using the Margin Scheme. Most art auction  houses charge an unsold charge and insurance before you can get your picture back. You must view and inspect any propertyin which you are interested well before the auction date - or get someone you trust to do so on your behalf if the property is in a distant location. 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. Date of Sale (to be completed by auctioneer). Not all pictures sell at auction. Announcements. A buyer who has dropped out of the bidding cannot be allowed to come back in and resume bidding. In UK law, Section 50A of the VAT Act 1994 allows the Treasury to make Orders to introduce second-hand schemes. You do not charge buyer’s premium or any other charges to the buyer. You do not have to apply the same option to all your sales. 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. VAT. VAT at 20% on that amount gives a total charge for commission of £120. It tells you when you may use the Auctioneers’ Scheme to account for VAT on the supplies you make. We base our commission rates according to your sale and what you have to offer. If you do not opt to use the Auctioneers’ Scheme or the Margin Scheme (see Notice 718), or you cannot meet the conditions described in paragraph 7.2, you must account for VAT in accordance with the general rules for auctioneers. Sunday, March 2, 2003. Further information is available in notice 703. Read Your Charter to find out what you can expect from HMRC and what we expect from you. But if you’re an auctioneer, and you act in your own name, you may opt to use the Auctioneers’ Scheme for works of art, antiques and collectors’ items which you’ve imported yourself (as principal on behalf of a third party) for onward sale in your own name, and works of art you have obtained (that is, which were supplied in the UK or acquired in Northern Ireland from an EU member state) from creators or their heirs, for onward sale in your own name, whether or not VAT was charged on their purchase or acquisition. There can be regional differences and like any service some are better than others and they all charge fees! In other words, it doesn’t become $11,450,000 because of some change in auction house policy. As of this auction, change in commission rules The sales commission is 20% + VAT on the commission only. This means a 25% discount on the commission! 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. For example, buyer’s premium or other commission, or incidental expenses such as packing, transport and insurance costs. If you need general help with this notice or have another VAT question you should phone our VAT helpline or make a VAT enquiry online. One is now charging £10 for a condition report. The tractor changed hands at today’s Cheffins’ Cambridge Vintage Sale at … This page has been updated because the Brexit transition period has ended. 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