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Rakhi Vasavada
Rakhi Vasavada, Financial Advisor
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Experience:  Attorney and Financial Expert. Have specialization in Financial Laws.Practice experience of over 13 years
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Were an art gallery that has just become VAT registered.

Customer Question

We're an art gallery that has just become VAT registered. We charge 2 different commission rates 40% and 30%.

All our artists are not VAT registered and therefore VAT is only charged on the commission element of the sale price - this was confirmed to us in an email from HMRC.

I'm after a simple formula which I can use to work out the 3 elements on a price:

Gallery's 40%
Artist's 60%
VAT on gallery's 40%

What I need to know is how to work out the VAT (20% in UK) on the sale price and then the nett figure is split 40/60. So for a painting that is selling for £1000 - after the VAT has been taken off I would then apportion 60% to the artist and 40% to the gallery but I don't know what the VAT bit is!

Thank you
Emma
Submitted: 2 years ago.
Category: Finance
Expert:  Rakhi Vasavada replied 2 years ago.
Dear Emma,

Hello and welcome. Thank you for providing an opportunity to assist you.

The VAT here would be calculated on 400 Pounds. For example, if the painting is selling for 1000, the gallary's share is 400 (40% of 1000) and therefore, the VAT would be 20% of 400.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards
Customer: replied 2 years ago.

Hi Rakhi


 


Our 40% is before VAT is added. That's why I'm getting a little lost on how to calculate this figure. So the £1000 is inclusive of VAT but I need to deduct VAT from this amount before I split the nett 40/60. VAT is only due on our commission rate of 40% of the nett

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Emma,

That is what I mean. You are selling at 1000, which includes 40% VAT. Am I correct ?

Now, your share ia 40%. So, its approximately 845 and after adding 20% to it, you reach the 1000 figure.

So, out of 845, 40% should be yours.


I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards
Customer: replied 2 years ago.

Hi Rakhi


 


Sorry, that's not what I meant - if I explain it the other way around then perhaps you can see what I'm trying to get at.


 


If the artist wants £600 for their painting - this figure represents 60% of the nett (excl VAT) selling price.


 


The gallery's 40% would be £400 and the VAT would only be due on the £400 making the total selling price £1080 split as follows:


 


Artist = £600


Gallery = £400


VAT = £80


 


However, in most cases the artist will tell us the selling price and I need to be able to work backwards to get the above 3 elements.


 


Regards


Emma

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Emma,

That is what I mean. You are selling at 1000, which includes 40% VAT. Am I correct ?

Now, your share ia 40%. So, its approximately 834 and after adding 20% to it, you reach the 1000 figure. (rounded off)

So, out of 834, 40% should be yours, i.e 333.60 and the artist's 60% would be 500.40.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards

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