We are the seller who deals direct withthe public. We then deduct the gallery commission from the price the customer pays us, and pay the remainder to the artist.
Lynsey.... thank you for your reply...As you are not VAT registered, you can't add VAT to the value of goods.If the artist is looking for a value inclusive of VAT you will have to show your sales value inflated to reflect VAT. Bear in mind, the customer will not be able to reclaim any VAT as you are not VAT registered.Furthermore, your commission will be on the inflated value (value adjusted to equivalent of VAT) and you pass the net of commission to the artist.Here is an example....Artist to you sells for 1,000+200(VAT) = £1,200.You are not VAT registered and the artist is looking for £1,200 from you less commission.You sell for 1,200 (your price includes the VAT you have suffered but unable to claim) but you show £1,200 as sales value.Your commission should be based on £1,200 and not £1,000.. this is how I would operate if it were my business.
I hope this is helpful and answers your question.
If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.
Thank you for your reply. Unfortunately I am still not clear on this.
When you say 'this is how I would operate if it were my business', does this mean that your answer is a personal opinion, or does the answer show what is legally required?
Staying within the law is our first priority, then not undercutting other galleries - which we would not be doing if we inflated the price to add the 'VAT'.
But would we be within the law to sell at the VAT inclusive price, and deduct commission on the inflated price?
Actually, I'm not sure that the artist IS asking for the 'retail plus VAT' price, because they can't keep the VAT either.
Sorry that this is so complex. Well, to me anyway. I realise that basically we can sell at whatever price we chose, but we don't want to get into trouble with the VAT.
Thank you again. Yes, that is helpful. So, to take your example, we take a retail price of £1000 +VAT, which is £1200.
We put this as the asking price.
Our commission is, say 45%, so do we retain 45% of the £1200 and pay the remainder to the artist, or retain 45% of the £1000 and pay the rest to the artist, plus the VAT of £200 that we had to add?
I wouldn't think there are too many artists making enough to be VAT registered (with some exceptions), but they will obviously be selling with other galleries that are VAT registered, so have to quote the 'retail plus VAT' price.
If you are happy and there are no more issues I will appreciate if you would kindly rate the service I provided to ensure I get credited for it.