Author: The Auction Collective
Published: 05 Jan 2020
Please note, this document is for guidance only, nothing contained in this document constitutes any form of tax advice and must not be relied on as such. For professional VAT advice, please contact a qualified expert.
When does The Auction Collective charge VAT?
The Auction Collective is an auction and sales platform for artists, art groups and charities.
We charge VAT on our services to the sellers on the platform. These are charged to the seller after our service has been provided.
- An auctioneering service - for a gallery using the platform to run an auction for artists.
- A sales service – for an artist selling through the platform.
Does The Auction Collective invoice the buyer?
No – Because we are not the seller, The Auction Collective only sends a ‘Payment Request’ to the buyer with instructions on how to pay for their items.
Does the Payment Request show any VAT charges?
No – As The Auction Collective is not the seller, the ‘Payment Request’ only contains:
- Details on the items bought
- The total funds to be transferred
- How to pay (either by card or bank transfer)
Any applicable VAT will need to be calculated by the seller from the total price.
Where are the funds paid?
Buyer’s payments are received in an escrow account with The Auction Collective payment provider (MangoPay). Whilst held in escrow, the funds are kept in e-wallets assigned to each seller.
What if a buyer requests an invoice for their accounts?
Should this be requested, the seller of the item is responsible for creating an invoice for the buyer. The Auction Collective will contact the seller with the buyer’s request.
What should be included in an invoice?
The invoice should be for the full amount paid by the buyer and include any applicable VAT charges as per the seller’s standard business invoicing.
Does a seller have to send an invoice to the buyer?
No – only if the buyer requests an invoice.
What if a seller is VAT-exempt and does not create VAT invoices?
In this instance, a seller is required to provide a sales receipt for the buyer as per the seller’s standard business practice.
How does a seller receive their funds?
Once the buyer has received their item, funds are released from the seller’s escrow e-wallet directly to the seller’s bank account.
How should a VAT registered seller account for their sale proceeds?
Any sales made through The Auction Collective platform should be accounted for in a seller’s usual accounting methods.
Any VAT registered sellers need to account for VAT within the total sold price.
For example: An item that sells for £12,000 at auction will breakdown to £10,000 + £2,000 VAT.
If an artist is donating an artwork to a charity to auction, who is responsible for invoicing the buyer and accounting for the sale?
As the artwork has been donated to the charity to sell, the charity is therefore the seller and if requested should invoice the buyer and account for any applicable VAT.
If an artist is donating the sale proceeds of an auctioned artwork, who is responsible for invoicing the buyer and accounting for the sale?
In this instance, the artist is selling the artwork and making a donation to the charity from their sale proceeds.
Therefore, the artist is the seller and if requested should invoice the buyer and account for any applicable VAT.
Can funds be split between multiple parties?
Yes - if both parties are registered with The Auction Collective and have passed our KYC checks.
The buyer’s payment is split into separate e-wallets for each party. The funds are then released directly into their individual bank accounts.
Why would I want funds split between multiple parties?
Splitting sale proceeds is useful when deducting funds from a seller’s sale proceeds. For example:
- Paying for an organiser’s fee (such as a curator or art adviser)
- Paying a gallery’s sales commission
- Making a donation to a charity
Who is responsible for invoicing the buyer if the funds are split?
The seller is still the one responsible for invoicing the buyer for the full amount and accounting for any applicable VAT.
Note - It is the sale proceeds that are split not the ownership of the object and therefore the status of the seller remains the same.
How should split funds be accounted for?
Any funds received by a third party that isn’t the seller, should be accounted for in the recipient’s usual accounting methods.
For example: A gallery’s sales commission is taken from the sale proceeds and transferred directly to the gallery’s bank account.
This should be recorded in the same manner in which they account for their standard sales commission from an artist. Their relationship and their services to the artist remains the same, the only difference is the collection of the funds.
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