Educational guides

To help guide you through the art of investing

Art is a popular class of investment asset, but what are the tax and cross-border issues, ask Charles Gothard, Partner, and Michael Parkinson, Senior Consultant, Macfarlanes LLP


Funding the purchase

If a UK resident non-domiciled individual uses offshore income to buy artwork abroad and then brings it to the UK, this could be taxed at up to 45%. Therefore the investor should either leave the artwork abroad or ensure that ‘clean capital’ is used to fund the purchase. If they have offshore trusts, they may want to use these to purchase the art rather than buying it themselves.

Importing works of art to the UK

Import VAT and customs duty are not currently payable on the importation of works of art from within the European Union (EU), but those imported from outside the EU are subject to VAT.

Although the 20% VAT rate on imports generally applies, qualifying works are taxed at 25% of their value, an effective rate of just 5%. These include; paintings, drawings, collages, decorative plaques, original engravings, prints, lithographs and original sculptures or statuary that were executed by hand, as well as some photographs.

Exporting works of art from the UK

No UK VAT or other duties are levied on export and there is no VAT on exports to the EU, but requirements for non-EU destinations vary.

Any work of art older than 50 years and valued at more than £180,000 requires an individual export licence.

If the artwork is believed to be of outstanding importance or significance, then a licence application may be referred to an Expert Adviser. If they deem it to be of national importance, it will then be referred to an expert committee, who may defer the application to enable a UK institution to purchase the work of art.

Tax issues on sale

The net profit on the sale of an artwork is generally subject to Capital Gains Tax (CGT) at 20%, unless the investor is actively trading in art, in which case they may be subject to Income Tax at rates of up to 45%.

Non-domiciled UK resident investors who are taxed on the remittance basis can avoid a charge to CGT by selling artwork outside the UK, but the gain will be taxed if the proceeds are brought to the UK.

Inheritance Tax considerations

There are two specific reliefs from the normal 40% Inheritance Tax, which might apply to works of art.

  1. Conditional exemption is available for any object or collection of pre-eminent national, scientific, historic or artistic interest, and for any object that is historically associated with a building of outstanding historic or architectural interest.
  2. An ‘offer in lieu’ involves the State agreeing to accept an object as payment or part-payment of an Inheritance Tax charge.

In practice, these two reliefs are relatively rare. Simpler strategies such as lifetime gifts and transactions are often used.

Non-domiciled UK residents can keep their art outside the scope of Inheritance Tax simply by keeping it outside the UK. 


Please seek your own legal advice when making such investments.



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