Buying and owning art can be one of life’s greatest joys. But while the drive to own art is often fuelled by an emotional connection with a piece or the prospect of holding a lucrative investment, it is important for buyers and owners of art to keep their wits about them, from both a legal and practical perspective.
Felix Hale (Sotheby’s Tax, Heritage and UK Museums Team) and Jo Thompson (Forsters LLP’s Art Group) aim to point those wanting to buy, sell, and hold works of art in the right direction. This five-part mini-series will cover the following key areas:
- Acquiring and selling art
- Transporting art
- Maintaining your collection
- Passing on your art collection to the next generation
- Art and philanthropy
This piece is aimed primarily at private individuals with a UK tax exposure.
1 – Acquiring and Selling Art
Acquiring and selling art can often be an intimidating prospect, particularly for a first-time buyer or seller. Even well-versed art collectors can find the process hard to navigate.
In Part 1, we highlight key points that you may wish to consider when it comes to acquiring and selling art for personal use, either privately or by auction.
A. Acquiring Art
Before taking the plunge and deciding to bid on a work of art at auction it is important to do your homework; you might wish to research the artist and the provenance and look back at some past sales. Try to see the artwork in person, even if the sale is online. Look carefully at the Auction catalogue (which nowadays is usually found online) and check if the lot is marked with any symbols as these may provide important information relating to, for example, VAT, Artist’s Resale Rights, and any export restrictions. Do get in touch with Sotheby’s if you have any questions or would like to see a condition report for the piece.
Buyer's premium
Buyers should be aware that auction houses will charge a ‘buyer’s premium’ to purchasers at auction, which is an amount over and above the ‘hammer price’ the auctioneer sells the work for. The rate of Buyer’s Premium will be listed on the auction house’s website or in the auction catalogue.
Artist Resale Rights (ARR)
ARR provide a payment to living artists (or their heirs in the 70 years following their death) when one of their works is resold for over £1,000 through an art market professional (e.g. a gallery or auction house). The amount, which can be charged to the buyer, is calculated on a sliding scale, and capped at £12,500.
Sale and purchase paperwork
If you are buying a work of art through a private sale, make sure you read the sale contract carefully in order to understand all of the costs, logistics and other terms associated with the sale. For further help with this, please get in touch with Forsters.
Once you have made a purchase, we recommend that you safely store all the paperwork associated with that purchase. It will come in handy if you decide to sell or make a gift of the work in the future and your accountants will thank you for the additional information when it comes to calculating any tax liabilities arising as a result of the purchase or future transfer of the work.
Tax considerations
VAT
Generally speaking, and with some exceptions, the purchase of a work of art in the UK for personal use is subject to VAT at the standard rate of 20%, even if the artwork is exported from the UK shortly after. VAT should not be applicable if the seller is not subject to VAT.
Works of art are often sold through what is known as the ‘margin scheme’, where VAT on second-hand goods is charged on the Buyer’s Premium element only. This means that the VAT arising on the purchase is assessed on the difference between the price the work was last sold for and the current sale price, as opposed to the entire sale price.
VAT, which is collected by the auction house or other seller alongside payment for the work, is the responsibility of the buyer, so it is best to check what the VAT liability will be and take this into consideration when gathering the funds for your art purchase. If you are buying the artwork for personal and private use, you are unlikely to be able to recover the VAT.
Considerations for international purchasers
With effect from 6 April 2025:
–During the first four years of an individual's UK tax residence (and assuming the individual has not been UK resident in the ten years prior to this) he/she can claim to be taxed under a special regime whereby they are not subject to income tax or capital gains tax (CGT) on most types of untaxed foreign income and/or gains (FIGs), even if brought to the UK (the 'FIG exception'). Those who are already UK resident may be able to claim this regime for the remainder of their first four years of UK tax residence, provided they were non-UK resident in the 10 UK tax years prior to becoming UK tax resident.
–Individuals who have been UK resident for more than four UK tax years will pay income tax and CGT on their worldwide income and gains. As such, bringing into the UK funds which have already suffered tax for a purchase should not trigger any further UK income tax and/or CGT liability.
Any untaxed FIGs that arose prior to 6 April 2025 to a UK resident previously claiming the remittance basis of taxation will continue to be taxed when remitted to the UK. This includes remittances by those eligible for the FIG exception. There will, however, be a limited window of three UK tax years (starting with the 2025/26 tax year) during which these individuals will be able to designate pre-6 April 2025 untaxed FIGs and pay reduced tax on these amounts (12% in 2025/2026 and 2026/2027 and 15% in 2027/2028). Where UK art purchases are anticipated, buyers may wish to take advantage of this opportunity to designate such funds, pay the 12%/15% tax, and then use those funds to acquire UK artwork (or to buy foreign artwork and bring it to the UK). Artwork previously acquired using untaxed FIGs can itself be designated, which means that once the relevant 12%/15% tax has been paid, the artwork can then be brought to the UK without further income tax/CGT to pay.
Choosing the right purchaser
As with the acquisition of any asset, it is helpful to think about the artwork’s use and future before buying it, as this will help to determine the most suitable purchaser, whether it be an individual, company or other entity. Although the ownership structure can be changed, it is preferable to get the structure right from the outset.
Deciding whether an individual, company or other entity should buy the artwork will depend on the context and should be considered on a case by case basis. For example, if an individual is UK resident but not a long-term UK resident and purchasing art in the UK, it might be worth considering the purchase of the art via an offshore structure, so as to shield the artwork from UK inheritance tax. Broadly, an individual will be a long-term UK resident for a UK tax year if they were UK resident for at least 10 of the previous 20 tax years.
If you would like advice on your current UK tax status and on how you might acquire and hold artwork, please contact Forsters.
B. Sale of Art
Finding the right forum
Finding the right sale forum is key to ensuring a successful sale of artwork. Usually, the decision as to whether or not a work should be sold at auction or through a private sale will depend on the nature of the work and your circumstances as seller.
Although Sotheby’s is probably best known for selling works of art at auction, it is also the largest private dealer in the secondary market, making it well-equipped to advise sellers wishing to pursue either sale route.
There are many different factors that should be taken into account when weighing up whether to take the auction or private sale route. These include the type and value of the work, the pool of potential buyers, and how urgently funds from the sale are required.
Offering works privately allows you to sell more discreetly and can give peace of mind by agreeing a fixed price. If funds need to be raised quickly and the next appropriate auction date is too far away, a private sale may be the most suitable option.
There may also be significant tax advantages in selling a work of art privately to certain UK museums or institutions (this will be covered in further detail in Part 5).
On the other hand, auction sales give the work the greatest exposure to potential buyers and the final purchase price is, in theory, limitless! It is important to liaise with the auction house to set attractive and realistic reserve prices and auction estimates before the sale to give your work of art the best chance of success.
To discuss the most appropriate sale route for your work of art, please contact Sotheby’s.
Tax implications
If you are a UK resident and do not claim, or are not eligible for, the remittance basis of taxation, there may be UK capital gains tax (CGT) to pay if your artwork has increased in value between the date you acquired it and the date of sale. Currently, CGT is charged at 18% at the basic rate and 24% at the higher rate.
Certain exemptions from CGT are available. For example, so-called ‘wasting assets’, which include clocks,watches, and classic cars, are exempt from CGT, as are individual objects sold for £6,000 or less. Be wary when it comes to selling items that are part of a set: you will only benefit from the CGT exemption if you sell all or part of the set for less than £6,000, or if you sell parts of the set to different people, with each part being sold for £6,000 or less.
In addition, each individual has an annual CGT-free allowance, which is currently £3,000 per year. If a work is being sold by more than one person jointly, then the individuals’ annual CGT allowances can be combined. If you are married, you might consider giving half of the artwork to your spouse before the sale (a transfer which will usually be exempt from both CGT and inheritance tax) and selling the artwork jointly to benefit from your combined annual CGT allowances. Please note that if the spouses do not share the same domicile, there could be an inheritance tax issue, so ensure advice is taken before any planning of this nature is carried out.
A UK resident with tax exposure in other jurisdictions should be mindful of liabilities on capital gains that may arise in those jurisdictions as a result of the sale and should consider whether any tax treaties between the UK and the jurisdiction in question would protect against the risk of double taxation. Please contact Forsters if you would like some further advice in relation to tax implications of selling your artwork.
In the next part of this mini-series, we will be considering the implications of owners transporting their art to or from the UK.
Please note that this briefing offers general guidance on the acquisition and sale of artwork. The circumstances of each case vary, and this note should not be relied upon in place of specific legal advice.
Felix Hale at Sotheby's
Felix Hale is a Director in Sotheby’s Tax, Heritage, & UK Museums department (Fiduciary Client Group) and is a member of Sotheby’s UK Chairmen’s Group. He has over a decade’s experience in the industry, having joined Sotheby’s in 2014.
He works with some of the most significant estates and collections in the UK, working with clients on valuations, sales, offers in lieu of tax, and claims for Conditional Exemption. He also frequently represents clients before the government Export Reviewing Committee. Felix is a STEP qualified Trust and Estate Practitioner (TEP) a member of the Professional Advisors to the International Art Market (PAIAM).
If you would like to contact Felix, you can email him on felix.hale@sothebys.com.
Jo Thompson is an associate in Forsters’ Private Client team and part of Forsters’ Art and Cultural Property Group. She acts for UK and international clients, advising high net worth individuals, families, landed estates, family offices, trustees and beneficiaries on a range of estate, trust and tax planning matters. Her work includes succession planning for a number of living artists and advising on heritage property matters. She also acts for high net worth individuals and trustees holding significant art collections.
If you would like to contact Jo, you can email her on jo.thompson@forsters.co.uk.
