Auction houses who refund VAT on the buyer’s premium to overseas purchasers without ensuring that the correct paperwork is in place could find themselves liable for the tax themselves.
That is the conclusion of ATG legal columnist Milton Silverman,
who advises that Her Majesty's Revenue and Customs set high
standards to which buyers must conform in order qualify for the
In the current issue of ATG's printed newspaper, Mr Silverman, a
partner in London law firm Streathers and a specialist in art
market-related legal issues, sets out details of the VAT
Auctioneers' Scheme in a specially commissioned article following a
number of approaches to ATG by auctioneers uncertain of their
position in the face of demands for VAT refunds from buyers in
China and other countries.
"To make the scheme work you have to adhere to the
record-keeping, invoicing and accounting requirements set out," he
advises. And he quotes directly from HMRC instructions which state:
"If the evidence of export provided is found to be unsatisfactory,
VAT zero-rating will not be allowed and the supplier of the goods
will be liable to account for the VAT due..."
Briefly, buyers must be able to show that the transaction has
actually taken place and that the goods they are claiming the
refund on are indeed those that have been purchased and exported,
and to the stated destination.
"There is a much longer list for 'Commercial transport
evidence'. This includes various forms of waybills, certificates of
shipment etc," writes Mr Silverman in his article.
Some of the larger auction houses, such as Christie's, avoid the
risk of being landed with their clients' VAT bill through a mix of
terms and conditions and offering an in-house export service that
takes care of all the bureaucracy on their behalf.
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