Why has the ARR threshold changed from Euros (€) to Pound Sterling (£)?
The Government has said it is making an amendment to the ARR Regulations to reduce regulatory burdens and costs on UK businesses. This follows the Retained EU Law (Revocation and Reform) Act which passed through Parliament in October.
The amendment has been tabled to address the anomaly of the ARR Regulations that required the sale to be calculated in Euros (€)s before being converted into Pounds Sterling (£) to administer the right.
The Government has said that these changes better reflect the UK market and provide greater business certainty by removing exchange rate fluctuations when calculating whether an artwork is eligible for ARR and the royalty payment due.
What is being amended?
The amendment means that all references in the ARR Regulations to Euros (€) will be replaced by references to Pound Sterling (£) and will apply to all sales concluded from 1st April 2024. The key changes to the ARR Regulations are:
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The minimum sale price for a work to qualify for ARR changes from €1000 to £1000
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The maximum sale price of a work that meets the conditions of the exemption relating to works recently acquired from the artist (known as the ‘bought as stock’ exemption) will change from €10,000 to £10,000
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The maximum royalty an artist or their heir can receive per transaction will change from €12,500 to £12,500
The calculation of an ARR royalty in Schedule 1 of the ARR Regulations will change currency from Euros to Pound Sterling. For example, “0 to 50,000 euro” will be substituted by “£0 to £50,000” and so forth.
When will the ARR currency change come into effect?
The currency change to Pounds Sterling will take effect from 1st April 2024. Sales concluded prior to this date will be subject to the Euros currency calculation.
I am an artist or legal beneficiary of an artist, how will the ARR currency change affect my income from sales of my work on the secondary market?
To qualify for a royalty, currently your artwork must sell for more than €1000.
From 1 April 2024, this will change to £1000, meaning sales will now need to meet this threshold before a royalty is due.
I am an Art Market Professional – how will the ARR currency change affect me?
The change from Euros (€) to GBP Pound Sterling (£) simplifies the royalty collection process.
Currently you must declare sales selling for more than €1000, meaning a currency conversion at the European Central Bank exchange rate for the date on which the sale took place must be made in order to confirm whether a sale qualifies. From 1st April 2024, you will only need to declare sales which have resold for more than £1000.
As the royalty is worked out in Euros according to a
sliding scale from 4% to 0.25%, the calculation of the royalty will also therefore change. For example, “0 to 50,000 euro” will be change to “£0 to £50,000” and so forth.
Sales taking place at the higher end of the threshold and the maximum royalty due to the artist or their beneficiary will also be affected by this change. Currently the maximum an artist or their beneficiary can receive is capped at €12,500 for one sale of one work, which is reached when the work sold for €2 million or more. From 1st April 2024, this will increase to £12,500 and £2 million or more respectively.
In addition, the maximum sale price of a work that meets the conditions of the exemption relating to works recently acquired from the artist (known as the ‘bought as stock’ exemption) will also change from €10,000 to £10,000.
As an art market professional, do I need to do anything differently when submitting sales information and paying ARR?
The Request For Sales Information that we send you on 1st April will relate to sales taking place on or before 31st March 2024 and therefore the Euros currency will apply.
When we write to you in August requesting your sales information from 1st April, you will no longer need to convert your sale to Euros if the sale took place after this date. If you are including a sale that took place before the 1st April, then the threshold in Euros will apply and the equivalent in Pounds Sterling must be worked out according to the European Central Bank exchange rate on the date the artwork was sold.
How will I know what is due in Pound Sterling (£) for sales concluded before 1st April 2024?
Does this impact the exclusion of VAT or Buyers Premium from the sale price?
Royalties will still be calculated on the sale price minus VAT for galleries, and the hammer price (sale price minus VAT and Buyers Premium) for auction houses.
VAT does not apply to the Artist’s Resale Right and this will continue to be the case. Resale royalties are calculated on the sale price excluding VAT. If you operate the VAT margin scheme, exclude VAT elements which are included in the sale price. The royalty itself is also not subject to VAT.
Has the upper limit of ARR payments changed?
Currently the maximum an artist or their beneficiary can receive is capped at €12,500 for one sale of one work, which is reached by works selling for €2 million or more. From 1st April 2024, this will increase to £12,500 and £2 million or more respectively.
Will there be any more changes to ARR after this?
ARR was retained in UK law through the introduction of the Retained EU Law (Revocation and Reform) Act which passed through Parliament in October. The Act allowed Government to make changes to laws that are deemed appropriate to ‘align better with UK law’ and therefore the change to references to currency in the ARR Regulations was approved. There were no other changes made to the ARR Regulations in this exercise, and ARR is not under any further review by Government.