AN OUTLINE OF TAXES AFFECTING THE OWNERSHIP OF WORKS OF ART IN THE UNITED KINGDOM

Tax on capital will affect most people who live or own property in the United Kingdom, whether or not they are British citizens. In this country, works of art, for the most part, are treated no differently from other property, although certain concessions may be available in the treatment of objects considered to be of national importance. Due to the increased value of many works of art, sales or gifts and their transfer on death must be looked at carefully in order to avoid unnecessary taxation during lifetime. Here we examine Inheritance Tax (IHT), Capital Gains Tax (CGT) and Value Added Tax (VAT). Estate Duty (ED) and Capital Transfer Tax (CTT) will also be considered. Droit de Suite, although not a tax, is considered here as a levy on sales.

This is a guide. You should seek specific advice before acting or deciding not to act.

Although not strictly a tax, Droit de Suite is, in effect, a new Intellectual Property right, which became law in this country on 14^th February 2006.

Royalties are payable on secondary sales between professionals, there is no royalty due on the first sale by the artist and on private secondary sales. Artists may not waive these rights. The seller is liable for the royalties but they are generally passed on to the purchaser.

So far, royalties are only payable to living EU artists (and others with reciprocal rights) generally sold with in the EU, although sales outside the EU might still be caught by this levy. However, by January 2012, these royalties will benefit the heirs of an artist's estate for a period of seventy years, provided the artist died after this date.

Royalties are paid on a sliding scale in Euros; from 0-50,000 at 4%, 50,000.01-200,000 at 3%, 200,000.01-350,000 at 1%, 350,000.01-500,000 at 0.5% and exceeding 500,000 at 0.25%. The maximum royalty is Euro 12,500.