Your Guide to Buying & Selling Artwork from Hypha Curates

Commission, Fees & VAT

Selling artwork on an online sales platform in the UK, such as Hypha Curates, involves understanding various charges. This guide will break down these elements for an artwork priced at £1000, considering Hypha Curates' commission structure & the platform's and artist's VAT registration status.

Understanding the key players

  • The Buyer: The individual purchasing the Artwork.

  • Hypha Curates: The online sales platform facilitating the sale. We are a UK based entity & are UK VAT registered. It's important to note that Hypha Curates states "30% of each sale supporting the charity & 70% going to the artist." This implies their 'commission' is a charitable contribution from the sale proceeds.

  • The Artist: The creator of the Artwork. The Artist’s VAT registration status is crucial.

An example artwork Sale for £1,000

Let's assume the Artwork is listed for £1,000. This is the Retail Price visible to the buyer.

1. Commission & fees charged by Hypha Curates

Hypha Curates has a clear model:

  • 70% of the sale goes to the Artist

  • 30% of the sale supports the Charity

So, for a £1,000 artwork:

  • Amount supporting the Charity (Hypha Curates' portion) = £1,000 x 0.30 = £300

While Hypha Curates describes this as supporting the Charity, from a transactional perspective, it acts as the platform's share or ‘commission’ for facilitating the sale.

2. VAT charged by Hypha Curates (to the Buyer)

As Hypha Curates operates in the UK & is deemed as the Seller of the Artwork, they are generally obliged to charge UK VAT at the standard rate (currently 20%) on the full sale price of the Artwork to the Buyer. This is because they are considered to be making the supply of the Artwork to the customer.

  • Artwork Sale Price: £1,000

  • VAT on Artwork (20% of £1,000): £1,000 x 0.20 = £200

Total price paid by the Buyer: £1,000 (Artwork price) + £200 (VAT) = £1,200

Important note for Buyers: The VAT shown on the invoice from Hypha Curates will typically be on the entire artwork price, not just the portion supporting the charity. Hypha Curates, as a VAT-registered entity, will then remit this VAT to HMRC.

3. Artist's invoice to Hypha Curates (& VAT Implication)

The Artist invoices Hypha Curates for their share of the sale, which is 70% of the artwork's sale price.

  • Artist's Share (70%): £1,000 x 0.70 = £700

The VAT implications for the Artist's invoice depend on whether the Artist is VAT registered.

Scenario A: The Artist is NOT VAT registered

If the Artist's taxable turnover is below the UK VAT registration threshold (currently £90,000 in a rolling 12-month period as of April 1, 2024), they are not required to register for VAT & therefore cannot charge VAT on their invoices.

  • Artist's Invoice to Hypha Curates: £700 (no VAT added)

In this case, Hypha Curates pays the artist £700. Hypha Curates has already collected £200 in VAT from the buyer and will remit that to HMRC.

Scenario B: Artist IS VAT Registered

If the Artist is VAT registered (either because their turnover exceeds the threshold or they have voluntarily registered), they must charge VAT on their supply to Hypha Curates. The standard rate of VAT in the UK is 20%.

  • Artist's Share (Net): £700

  • VAT on Artist's Share (20% of £700): £700 x 0.20 = £140

  • Artist's invoice to Hypha Curates (Total): £700 + £140 = £840

In this scenario, Hypha Curates pays the artist £840. The artist then remits the £140 VAT to HMRC.

From Hypha Curates' perspective:

  • They collected £200 VAT from the Buyer (output VAT)

  • They paid £140 VAT to the Artist (input VAT).

  • Their net VAT payment to HMRC related to this transaction would be £200 (output VAT from sale) - £140 (input VAT from artist) = £60. 

4. Artist's Resale Right (ARR) - Droit de Suite

The Artist's Resale Right (ARR), also known as Droit de Suite, is a royalty payable to the artist (or their heirs for up to 70 years after their death) each time their original artwork is resold through an art market professional (like Hypha Curates) for £1,000 or more.

For an artwork sold at £1,000, the ARR is calculated on a sliding scale. Since the sale price is £1,000, it falls into the lowest band:

  • Royalty Rate: 4% for sale prices up to £50,000

  • ARR for £1,000 artwork: £1,000 * 0.04 = £40

Who pays ARR? The ARR royalty is typically paid by the Seller (which, in the case of a platform-facilitated sale, might be Hypha Curates or passed on to the artist through agreement) to a collecting society (like DACS or ACS) who then distributes it to the artist. ARR is exempt from VAT.

Important Note: Some sales are exempt from ARR, for example, if the work was bought directly from the Artist less than three years previously & is being resold for £10,000 or less (the 'bought as stock exception'). However, in a standard new sale from Artist to Buyer via a platform, ARR would usually apply if the threshold is met.

Summary of Financial Flows (Illustrative)

Consolidating the figures with the 70% artist share / 30% charity support model and 20% UK VAT:

Buyer's perspective:

  • Artwork Price: £1,000

  • VAT (20% of £1,000): £200

  • Total Paid by Buyer: £1,200

Hypha Curates' perspective (where Artist is NOT VAT registered):

  • Receives from Buyer: £1,200

  • Less VAT to HMRC: £200

  • Remaining: £1,000

  • Portion supporting the charity (30% of £1,000): £300

  • Pays Artist: £700

  • (Hypha Curates, as the art market professional facilitating the sale, would be responsible for deducting and remitting the ARR from the overall sale, potentially from the Artist's share, depending on their specific agreement with Artists).

Artist's perspective (where artist is NOT VAT registered):

  • Receives from Hypha Curates: £700 (This is their net income from the sale before any personal tax)

  • Less ARR (if applicable, £40 for a £1,000 sale, often deducted by the platform before payment): £40

  • Net to Artist (before personal income tax): £660

Artist's perspective (where artist IS VAT registered):

  • Invoice to Hypha Curates: £840 (£700 net + £140 VAT)

  • Remits VAT to HMRC: £140

  • Net to Artist from Sale (before personal income tax): £700

  • Less ARR (if applicable, £40 for a £1,000 sale, often deducted by the platform before payment): £40

  • Net to Artist (before personal income tax): £660

Key Takeaways for Buyers and Artists

  • For Buyers: Always check the final Price, including VAT, before committing to a purchase. Hypha Curates, operating in the UK, will charge VAT on the full sale price.

  • For Artists (VAT Registered): You must charge VAT on your 70% share of the sale to Hypha Curates if you are VAT registered. This VAT will then be remitted to HMRC. You can reclaim VAT on your business expenses (input VAT).

  • For Artists (Not VAT Registered): You do not charge VAT on your 70% share. However, Hypha Curates will still charge VAT on the full sale price to the buyer.

  • Artist's Resale Right (ARR): Be aware of ARR for artworks sold for £1,000 or more. This is a separate royalty and is generally handled by the art market professional (Hypha Curates).

  • Contracts are key: Always review Hypha Curates' terms and conditions, especially regarding how the 70%/30% split is applied, VAT treatment & how ARR is managed, to ensure full transparency.

This guide provides a general overview based on current UK tax laws and Hypha Curates' stated model. Specific terms and conditions may vary, and tax regulations can be complex. For precise advice, it's always recommended to consult with a tax professional or accountant specialising in art sales.