A trader who incurs capital expenditure on machinery or plant is entitled to a wear and tear allowance if the asset is in use for the purpose of his trade at the end of the basic period for the tax year.
This also applies to someone who wants to invest in art.
The annual wear and tear allowance is 12.5% on a straight line basis. Where a corporate or individual tax payer buys a work of art and displays it at their business premises for the purpose of promoting their business, the work of art is treated as machinery or plant, and is eligible for the annual wear and tear allowance of 12.5%.
Your accountant should be consulted with regard to all intended art related investments and where deemed necessary be approved by the Revenue Commissioners.
The following is an example of the possible returns to someone who wants to invest in art, who is VAT registered & in the 40% Tax bracket, who invests the sum of € 25,000 over an 8 year period under the Wear and Tear Allowance Section 285 Finance Act 1997.
Individual Investor VAT Registered – 8 Year Term
Investment in art. – €25,000
V.a.t. Credit 13.5% – € 2,974
Wear & tear allowance 40% tax – € 8,810
Net Investment – € 13,216
Projected Valuation of art based on a 6% annual growth of 8 years – €39,850
Gross Profit before taxes – €26,634
Investors should note that in the event that they sell the asset on the completion of the 8 year term Capital gains tax and Vat are applicable.
• Art is an asset class that is mainly funded by net wealth and not by borrowings.
• The Fine art market has identified itself as a safe haven investment, providing positive annual returns together with its ability to survive the recent economic downturn.
• The Fine art market is supported largely by high net worth individuals.
• Investors can take personal possession of their purchased artwork.
• Access to expertise of acquiring works of Fine art at attractive prices
• Access to art works which deliver an average growth of 6% per annum.
• Access to artists with a proven track record at auction.
• Art as an investment has a high level of asset security.
• We offer free advice on the disposal of works of art.
• The K Gallery can assist with the sale of works of art, on behalf of the investor, for a negotiated fee, based on the profit achieved on the actual sale, rather than the hammer price.