Irish buyers face 15% post-Brexit tax premium on art sold in UK

Now that Brexit is a reality, how does it affect buying at auction and where does it place Ireland as a player in the EU auction market?

For buyers, it all boils down to where you are bidding from.

When Irish auction houses sell goods to Britain (Northern Ireland is excluded from new rules), buyers will pay less. The Irish VAT of 13.5 per cent is no longer applicable as it is now replaced by the UK VAT rate of 5 per cent, which is good news for the Irish antiques trade.

However, goods trading in the other direction – from Britain to Ireland – will have more significant charges. After paying the UK buyers’ premium, which is normally 25 per cent (the additional UK 5 per cent tax is now dropped), there will be an Irish customs VAT rate applied to goods coming into Ireland, which equates to 13.5 per cent on art.

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But this rate is applied to the total cost – including shipping and premiums – so for large pieces of furniture, as the shipping costs rise, so too will the amount of duty paid.

For artworks sold in Britain to Ireland, Arabella Bishop, head of Sotheby'sIreland, estimates the new aggregate will be in the region of 45 per cent, which is a 15 per cent increase on rates payable prior to Brexit.

Resale rights

But bear in mind that this is before the artist’s resale rights are added. This is where artworks are resold by art market professionals, such as an auction house or dealer, for more than €3,000. The artist or their benificiary are entitled to receive a percentage of the sale price.

In Ireland, this levy is paid by the seller. In the UK, however, it is the buyer who is levied, adding a potential 4 per cent – up to a maximum royalty of €12,500.

Adding to these issuesare further headaches arising from increased customs paperwork, which is proving problematic for hauliers between Britain and Ireland. As a niche industry, there is little clarification for art and antiques providers, and consulting Revenue’s website does little to provide further clarity. One auction specialist described the situation as a “quagmire”.

“I have spoken to one haulier that we have used for years, who has decided to hang up his keys until there is proper clarification on all of this,” says James O’Halloran of Adam’s on St Stephen’s Green.

While large UK auction houses have wasted no time in redirecting global consignments to affiliated auction rooms in Paris – to avoid the headaches of customs and paperwork – it appears that affiliated Irish auction houses hoping to get a share of this redistribution are missing an opportunity as they can’t compete with the lower VAT rates in other EU member states.

France has its eye firmly on the £14 billion (€15.8 billion) worth of art that finds its way through London every year, £9 billion of which is exported worldwide. But what makes France, and indeed Germany, more attractive than Ireland as a hub is that France has set its VAT rate for imports of artworks at a very enticing 5.5 per cent – the lowest rate in the EU – followed closely by Germany at 7 per cent.

O’Halloran says this leaves Ireland in a non-competitive playing field with its 13.5 per cent VAT rate on art. “As the only remaining English-speaking country in Europe, we are the natural relocation destination for the British art market business, which now needs to set up subsidiary companies within the EU.”

Bishop of Sotheby’s agrees: “The import tax of 13.5 per cent for art on entry point to Ireland, could in turn make the Irish art market very localised. With the duty being one of the highest in Europe, there is a chance over time it will be detrimental to the art market here.”

The way things currently stand, when Irish auction houses sell to Britain buyers there get a better deal as they save about 8 per cent – taking the differential in VAT rates into account. It also makes it more attractive for the Irish industry to sell in Britain as they will pay lower VAT rates.

On the flip side a person in Ireland buying art in Britain will need to pay import tax and customs-clearance fees. When all these costs are included, it could add a potential 15 per cent to the final bill compared with during the pre-Brexit era.

Despite the current teething problems, there is an acceptance that uncertainties around customs clearance and endless paperwork will pass. But until they do there is also a sense of a missed opportunity for Ireland to leverage its strength as the sole English-speaking hub for the EU art and antiques industry.

If Ireland is to capitalise on Brexit fallout and compete with other EU member states, auction houses here are calling for a reduction in the VAT rate on artworks in order to even out the playing field.