The art business is part of the commercial world, like any other business; as such, it is subject to the general law of the land. At the same time, the art world is undoubtedly a very specific environment subject to specialist considerations.

One fundamental Act that has retained its relevance over many years is the Sale of Goods Act 1979. It is applicable UK-wide. As its title suggests, it concerns the sale of goods; this includes the sale of artworks.

Some basic sample provisions applicable to the art world include the following.

• Section 12: this implies into any contract of sale a term that the seller has the right to sell the goods forming the subject of the contract of sale – eg, a work of art.
• Section 13: this implies into any contract of sale by description that the goods will correspond with the description.
• Section 20:4: unless otherwise agreed, the goods (eg, artwork(s)) remain at the seller’s risk until the property in them (ie, ownership) is transferred to the buyer. When ownership is transferred to the buyer, the goods are then at the buyer’s risk, whether delivery has been made or not.
• Section 57(2): a sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in another customary manner. Until the announcement is made, any bidder may retract his bid.

The above are fundamental starting points, subject to variation where allowed under statute – eg, Section 20:4, “unless otherwise agreed” – and examination of the particular facts of any case.

Other statutes and relevant authorities in the art world are discussed in the following sections.

Artists’ rights may vary by contract; however, the following should be noted.

Perhaps the foremost right of an artist the moment they create a work of art is their instant copyright in it. No one has the right to reproduce an image of that work without the artist’s permission.

Also significant are the moral rights of an artist: the essential moral rights are the right to be identified as the author of a work (known as the right of paternity) and  the right to object to derogatory treatment of a work (known as the right of integrity). The right of paternity exists for the entire copyright term, and requires individuals who commercially broadcast, sell, perform or exhibit literary, dramatic, musical or artistic works to identify the author of the work – subject to specific exceptions (such as where Crown copyright may apply).

The author of an artistic work has the right to be identified whenever:

• the work is published commercially or exhibited in public, or a visual image of it is communicated to the public; or
• a film including a visual image of the work is shown in public or copies of such film are issued to the public.

A joint work is created when two or more people contribute copyrightable authorship to a project with the intention that they are making one final work. Under copyright law, all the people who create a joint work own copyright in the work together.

Cases coming to court on such issues are very rare, but one such case in 2020 was Nicholas Martin and Big Hat Stories Ltd v Julia Kogan. This concerned a dispute as to the contribution or otherwise of the defendant to a screenplay. Ultimately, after reference to the Court of Appeal, the judge decided that Julia Kogan did indeed contribute to the screenplay as a joint author.

There are two distinct areas, as follows.

Civil Claims

An individual or business has civil rights to seek to protect themselves against infringement of their copyright. This is best illustrated by an actual case in which the authors’ firm was engaged.

The case involved a substantial fashion business which used to design and supply knitwear to the retail trade. It noticed that its designs were being replicated very precisely by a major nationwide department store.

A letter before action was sent to the department store making clear that unless the infringing replications were stopped immediately the client would go to court claiming:

• an injunction ordering the department store to stop making further infringing copies of the design in question;
• damages arising as a consequence of the wrongful infringement of the fashion business’ copyright; and
• delivery to the fashion business of all the infringing copies made by the department store.

These three claims for injunction, damages and delivery are the primary remedies available to an aggrieved copyright owner in a civil action.

Similar claims have been made in the art world by aggrieved artists claiming that another is infringing their copyright. One well-known British artist who has been subject to a number of such alleged copyright claims is Damien Hirst. It is believed that one such claim resulted in an out-of-court settlement.

Criminal Claims

It is possible for criminal prosecution to take place where there is wholesale infringement of copyright on a commercial scale. Trading Standards (a government body) plays an active role in such prosecutions. A recent recorded case involving Trading Standards of interest to the art world involved its successful prosecution of an online counterfeit poster empire producing thousands of posters featuring football, music, toy and film designs protected by copyright. A warrant was served on the manufacturing premises, leading to the seizure of printing equipment, printed posters and pre-printed customer labels.

Whether the route is civil or criminal, in order to show infringement in a copyright claim, “a substantial part” of the relevant work needs to have been copied without the owner’s permission. There is no formal definition of “substantial part” but it has been discussed at great length by the courts, including the House of Lords. It has been interpreted to mean a qualitatively significant part of a work, even though this may not be a large part of the work. Therefore, a small physical portion of the work could still be a substantial part.

There is no automatic go-to artwork register in the UK.

There are, however, a number of well-established databases where stolen art can be registered.

Arguably the most established of these is Interpol. Interpol operates at an international level, and contains certified police information on stolen and missing art from all over the world.

Although permission to register on the database is limited to certain respected international organisations (eg, UNESCO), any individual can apply to use the Interpol database for search purposes.

The Art Loss Register is a private database that also records lost and stolen art, and was founded in London in 1990. Its founding shareholders included businesses with interests in the art market and the insurance industry.

Artists’ resale right (ARR) is reputed to be derived from an incident in France in the 19th century, and is certainly French in origin. A collector apparently made a fortune from selling The Angelus at auction (a painting by Jean-François Millet). However, Millet’s family supposedly continued to live in extreme poverty. In 1948, the resale right was recognised in the Berne Convention for the protection of literary and artistic works. In 1967, the World Intellectual Property Organization (WIPO) was created. ARR was included among WIPO’s purposes, along with collaboration thereon with artists’ organisations and governments worldwide.

Currently, in the UK, ARR provides for artists and other authors of original works of art to be paid a royalty every time one of their works is resold through an art market professional (AMP).

After some debate and argument (including that only the richest artists’ estates stood to gain from the introduction of ARR), further to an EU Directive, ARR became enforceable in the UK through the Artist’s Resale Right Regulations 2006.

Sale price must reach GBP1,000 for ARR to apply, and is then calculated on a sliding scale. The maximum royalty payable on any single sale of a work is GBP12,500.

Specialist societies administer the collection of ARR and then make payment to the artists involved.

This topic remains contentious with many AMPs, in so far as (for example) the levy percentage is based on the whole of the sale price, even though the profit made may be minimal and possibly less than the ARR.

In order to obtain permission to use images of artworks protected by copyright, in most cases all that is required is to approach the copyright owner for that permission. The permission granted should, for the purposes of evidence, be granted and obtained in writing.

No automatic “tick box” process exists whereby a deceased artist’s artworks may be authenticated. In reality, it is a question of creating the very best possible evidence available, to minimise dispute upon the artist’s death.

Undoubtedly the most effective way of doing this is to create good, systematic evidence during the artist’s lifetime, involving the artist directly in the process; evidence of the artist’s direct endorsement is going to be the most potent evidence. The artist should be instructed on how best to do this in a professional and scientific manner.

Their inventory should include a record of each work created, title and date, with any commentary to identify the work with any idiosyncrasies arising that the artist may consider appropriate. They should reflect on the future, with these questions in mind: what need I record to identify this work as unequivocally mine when I am no longer around to verify it as such? This is my unique signature; how best can I keep it unique?

In summary, the artist is effectively seeking to issue a “certificate of authenticity” during their lifetime. A “certificate of authenticity” has no defined scientific meaning. It is simply seeking to do exactly as it sounds: to certify as far as possible, without doubt, that this work is indeed by this artist. It will contain a host of information as referenced above, the ultimate aim being to seek to dispel any doubt that this work is indeed by this artist.

All this is with a view to avoiding what could be hugely complex, time-consuming, costly and contentious disputes involving expert witnesses, after death.

There is no supervening right – either with the courts or any other body – by which a foundation or any other similar entity can be automatically compelled to include a specific artwork in the artist’s catalogue raisonné, or (for example) to issue a favourable opinion regarding a certificate of authenticity.

When they arise, the issues here can be very complex, and may not even be resolved by time-consuming and expensive litigation should that route be taken by any of the parties involved.

A real world example best illustrates this. A number of famous artists have been involved in cases directly relevant to these issues – for example, foundations representing Picasso, Jeann Michel Basquiat, Alexander Calder, Roy Liechtenstein, Jackson Pollock and Andy Warhol have become heavily embroiled in contentious issues of authenticity, in some cases eventually dissolving their authentication boards due to the fear of litigation. For the same reasons, catalogue raisonnés, while being one of the key elements in determining authenticity of an artwork, are now often issued by foundations only with extreme caution, as a result of well-publicised disputes and legal wrangles.

A good example is the notorious Andy Warhol Foundation dispute. This took place in the USA, but the issues are universal. Andy Warhol died in 1987, and initial issues relating to art authentication were handled by his business manager, Fred Hughes. Due to an increasing number of applications relating to authenticity, an official art authentication board was set up.

Central to an understanding of Warhol’s creative process is its collaborative nature. At one point, it was reported that he farmed out part of the process concerning a video camera to an outside source – namely, a magazine publisher, Richard Ekstract. Warhol also involved a silkscreen shop in the creative process. Upon completion of the works, he then reportedly approved the finished paintings. Andy Warhol’s involvement has been compared to that of an art director, supervising the whole process.

The collector Joe Simon sued the Andy Warhol authentication board over a red self-portrait dating from 1965. This painting had been originally authenticated by Fred Hughes. Nevertheless, the authentication board rejected Simon’s painting, apparently because it was determined to have been created “off premises”. However, it has been pointed out that the intent of the artist, Andy Warhol, was that Joe Simon’s painting was one of his creations.

Nevertheless, Joe Simon’s painting was unequivocally stamped “DENIED”, in red ink on the back. The foundation rejected it twice. Simon sued, claiming (among other things) that there was an alleged conspiracy by the foundation to monopolise and control the market for Warhol art.

It was a long, arduous and expensive case. Eventually, the suit was dropped, after the foundation had spent over USD6 million fighting it. However, the foundation stopped authenticating Warhols art in 2011.

Such was the flood of claims against art foundations that the New York Senate became involved in legislation to effectively reduce the legal burden on art authenticators.

It has been appropriately pointed out that whatever the documentation available (eg, catalogue raisonnés, certificates of authenticity, foundation support material) it is the art market that ultimately decides whose opinion matters in determining what is authentic and what is not.

The real issue here is not whether a work is found to be inauthentic but – even if so – whether there is a contractual term (or maybe a finding of negligence) which results in liability attaching to the seller of the work to the benefit of the aggrieved buyer.

No case better illustrates this point than that of Drake v Thomas Agnew & Sons Ltd, a High Court case on which judgment was given in 2002.

The defendant, a very well-known firm of art dealers, sold a painting of the fourth Duke of Lennox and first Duke of Richmond to the claimant, Mr Drake. Mr Drake believed that the painting was by Sir Anthony van Dyck, but later discovered that it was not and therefore sought a refund of the price paid from the defendants.

The central questions in the proceedings – and critical to the issue being discussed here – were as follows.

• Was it an express term of the contract that van Dyck himself painted the portrait?
• Additionally (and effectively alternatively), was it a sale by description within the meaning of Section 13 of the Sale of Goods Act 1979 (which would mean that it was an implied condition that the painting should correspond with the description as being painted by Sir Anthony van Dyck)?

The defendant denied all this, essentially asserting that its statements leading to the sale were manifestly statements of opinion only, particularly when seen in context, and did not become a term of the contract.

The judge examined all the evidence, the brochure, the invoice and the communications between the parties, and decided as follows: “my conclusion is that there was no term of the contract that the painting was by van Dyck and it was not a sale by description.”

Had the judge found differently – ie, that the defendants had committed themselves by way of a term in the contract to the painting indeed being by van Dyck – the claimant would likely have received the difference in value between what he had paid for it and the actual value of the painting he had received; however, it was not the claimant’s day.

The most authoritative definition of cultural heritage derives from UNESCO.

Cultural heritage includes artefacts, monuments, a group of buildings and sites, and museums that have a diversity of values (including symbolic, historic, artistic, aesthetic, ethnological or anthropological, scientific and socially significant). It includes tangible heritage (movable, immobile and underwater) and intangible cultural heritage (ICH) embedded into cultural and natural heritage artefacts, sites or monuments. The definition excludes ICH related to other cultural domains such as festivals, celebrations, etc. It covers industrial heritage and cave paintings.

See UNESCO Institute for Statistics, 2009 UNESCO Framework for Cultural Statistics.

This relates to a scenario that has taken place worldwide over the centuries, whereby a nation acquires cultural heritage items by some form of appropriation (which could be termed “adverse possession”) from another nation.

Most especially in recent years, these issues have become highly politicised, and are by no means now simply matters of law.

The most high-profile example in the UK is undoubtedly that of the Elgin Marbles or “Parthenon sculptures”. British diplomat Lord Elgin removed the sculptures from the Parthenon temple in Greece in the early 19th century (this was apparently done using 170 crates); thereafter, they were known as the Elgin Marbles. Greece has campaigned relentlessly to have these sculptures returned to them.

The Marbles are presently held in the British Museum. Confining ourselves strictly to English law for the moment, it has been repeatedly argued that the British Museum Act 1963 forbids the museum from parting with the Parthenon sculptures.

However, the question has become much broader, and moral and political issues are now heavily involved. The Greek and British governments are in negotiation and, at the time of writing, this is an ongoing matter yet to be resolved.

In English law, cultural heritage findings by private individuals have long been described as “treasure trove”.

This used to be governed by the common law on treasure troves, and dates at least as far back as the 12th century – it was established as part of medieval English law in ancient texts from around 1235. However, it is believed that the concept itself likely existed even earlier, with roots in Norman and Anglo-Saxon legal traditions. Treasure trove referred to gold or silver that had been hidden with no known owner.

Today, the governing act is the Treasure Act 1996. This has been updated by statutory instrument such that the definition of treasure trove has been amended – all in the context of a growth of interest in metal detecting. The government reports that over 90% of treasure finds are made by metal detectorists. Notable discoveries in the February 2025 report include Roman coins dating from Augustus (28BCE–14CE) found in London and Hampshire.

Further to the Treasure (Designation) (Amendment) Order 2023, the basic definition of treasure is any metallic object (but not coins) found after 24 September 1997 which is over 200 years old (when found) and containing at least 10% by weight of gold or silver. An additional important new requirement for the object to qualify as treasure is that it “provides an exceptional insight into an aspect of national or regional history, archaeology or culture”. Failure to report a treasure find within 14 days remains a criminal offence.

An important question is whether this is being considered from the point of view of the seller or the purchaser. If from the seller’s perspective, key suggested clauses and points to consider include the following.

• Identification of the relevant work of art, including (for example) title, artist, medium, dimensions, year of creation, edition number.
• Purchase price and payment terms, including total purchase price, payment structure, whether full payment is upfront, instalment plan, required deposit.
• Acceptable payment methods, such as bank transfer, cheque, cryptocurrency.
• Consequences of late or non-payment – eg, interest, termination of contract.
• Delivery, including:
1. whether the buyer or seller arranges shipping;
2. expected delivery date and method of transportation; and
3. who bears the cost of shipping, insurance and customs duties.
• Transfer of ownership/title. When does ownership transfer (eg, ownership upon full payment only)?
• Risk of loss. When does this pass? Upon full payment or upon delivery?
• Condition of the work of art:
1. a description of the condition of the work of art at the time of sale;
2. whether the sale is “as is” or includes any warranties; and
3. whether the buyer has inspected or waived the right to inspect.
• Intellectual property rights: clarification that the sale does not transfer copyright unless explicitly agreed. Which party retains reproduction rights?
• Resale and right of first refusal (if applicable) – eg:
1. whether the seller or artist has the right to be notified before resale; and
2. whether the seller has a right of first refusal to re-purchase the work of art.

Export and Import Requirements

The first consideration involves ensuring compliance with UK export regulations. Arts Council England (the “Arts Council”) operates the export control regime on behalf of the Secretary of State.

Export regulations are complex, but a brief summary is as follows.

Cultural goods may be exported out of the UK:

• without an export licence, if they were manufactured or produced 50 years or less before the date of exportation, or if they are in a category specifically excluded by legislation, such as stamps;
• using the Open General Export Licence, where the objects fall within one of the specific categories set out in that Licence;
• using an Open Individual Export Licence, where one is held by the exporter or their business; or
• by applying for an individual export licence if none of the above options is available.

Since Brexit, exports to the EU now require the same licences as other non-UK destinations.

Compliance with all import regulations of the receiving country is also a crucial requirement.

Culturally significant works

Higher value or culturally significant pieces may be subject to a delay if the UK government considers them of national importance.

If the artwork is of national cultural significance, a deferral period may be imposed to allow UK institutions the chance to acquire it.

Provenance documents

Regarding provenance and authenticity documents, customs authorities often require documentation proving the artwork’s authenticity and ownership history to prevent trafficking of stolen or forged art.

Condition Reports

Pre-and post-shipping condition reports should be conducted to document any damage claims.

Shipping

Standard courier services will not be suitable for high-value art. Specialised art shippers ensure proper handling, climate control and insurance coverage.

The first issue to consider here is: what are the terms of the contract between the gallery owner/auction house and the potential buyer?

The contract may stipulate what is being sold and what is “guaranteed” by the seller and, as importantly, may effectively define what is not guaranteed by the seller. The terms of the contract can greatly influence and be determinative as to what liabilities (if any) gallery owners or auction houses face in cases of selling inauthentic or plagiarised artworks, or indeed any artworks about which there are complaints.

A much quoted case that greatly illustrates this is Leaf v International Galleries. In that case, the buyer of a painting of Salisbury Cathedral by John Constable (1776–1837) sought to avoid the contract of sale on the grounds that the work was a forgery.

In the Court of Appeal, Lord Denning said the following (emphasis added):

“In my opinion, this case is to be decided according to the well-known principles applicable to the sale of goods. This was a contract for the sale of goods. There was a mistake about the quality of the subject matter, because both parties believed the picture to be a Constable; and that mistake was in one sense essential or fundamental. But such a mistake does not avoid the contract: there was no mistake at all about the subject matter of the sale. It was a specific picture, ’Salisbury Cathedral’. The parties were agreed in the same terms on the same subject matter, and that is sufficient to make a contract…”

Thus, the judge was saying that the buyer agreed to buy a picture of Salisbury Cathedral, and a picture of Salisbury Cathedral is what he received.

If the buyer is successful in their claim, remedies include damages and/or rescission of the contract – ie, the contract is deemed void from the beginning, the painting is returned to the seller and the buyer receives the full purchase price back.

As to precisely what checks should take place, much will depend on the particular work of art being sold. However, suggested checks and verifications would include the following.

Ownership History

Seek all available documentation proving a clear chain of ownership.

Identify any gaps in provenance, and consider the significance of such gaps. Could it possibly indicate forgery or theft, for example?

As far as possible, seek to verify any exhibition history that may exist, and available auction records.

Authenticity

As far as possible, attempt to verify that the work of art in question is properly attributed to the artist – eg, by seeking out relevant evidence such as catalogue raisonné, certificates of authenticity and any expert analysis from known specialists.

Stolen Art

Check stolen art databases, such as Interpol’s Stolen Works of Art Database (the premier international database). Others include the FBI’s National Stolen Art File, and the Art Loss Register.

Claims

Carry out checks confirming that there are no loans or liens against the work of art concerned, or any form of legal claim on it.

The Seller

The auction house/gallery should obtain unequivocal written confirmation from the seller that they have the right to sell the work in question.

Export and Import Compliance

If the work of art in issue has been or is to be imported or exported, checks should be made to ensure that the relevant export and import regulations pertinent to the countries involved have been complied with. In this connection, see 6.2 Issues in Cross-Border Art Sales.

The term “art adviser” is a very informal generic term adopted by many who choose to enter the art business, and in itself means very little.

Most importantly, those who enter the art trade in some form of advisory capacity need to be aware of their duties to their clients. In so far as they proclaim themselves to be advisers, they have a duty of care to advise their clients professionally. Not infrequently, an “art adviser” will know both sides to a transaction. In that event, the art adviser must be very careful to avoid any (potential) conflict of interest. The adviser should act for one party only.

By way of example, the advisory role may involve:

• guidance on acquiring, selling and managing art collections;
• conducting market research;
• sourcing artworks;
• negotiating prices and handling transactions;
• assisting with estate planning;
• investigating authenticity and provenance;
• guidance on relevant experts and valuers; and
• managing the client’s art-related requirements in general.

A little while ago, HMRC’s strategy lead for AMPs wrote an article titled “five top tips from HMRC to avoid the most common errors HMRC finds when it carries out compliance visits”.

HMRC are an important authority on the subject, and a summary is as follows.

Risk Assessment

A risk assessment is the very foundation on which compliance with anti-money laundering (AML) regulations is built. It is bespoke to the particular business, and will change and develop depending on the business model. There is no off-the-shelf risk assessment; the risks for the particular business have to be assessed.

Policies, Controls and Procedures

Following completion of the risk assessment, appropriate policies, controls and procedures (PCPs) must be in place. These need to “mitigate and manage effectively the risks… identified”, and to be regularly reviewed. As the risk changes, so do the PCPs need to adapt accordingly.

Customer Due Diligence

The Money Laundering Regulations (MLRs) specify when customer due diligence should be applied. Regulation 27 details the general requirements together with the specific requirements on AMPs. Once the business has made decisions on when to apply due diligence, Regulation 28 details precisely how this should be done. Knowing the identity of the customer is critical and is a cornerstone of the MLRs. Almost all post-inspection penalties that HMRC issues contain a sanction relating to failure to comply properly with the customer due diligence requirements.

Timing of Verification and Record-Keeping

The requirements of timing of customer due diligence verifications are quite specific. An audit trail needs to be created to demonstrate that the MLRs have been complied with. Businesses need to understand record-keeping requirements and comply with them.

Enhanced Due Diligence

Knowing when enhanced due diligence (EDD) needs to be applied is essential. Links need to be made between the business’ risk assessment, PCPs, and through to any resulting EDD requirements. EDD needs to be applied (for example) when transacting with a politically exposed person, or when encountering a highly unusual transaction. The MLRs are specific on the full range of EDD requirements: for example, does the business expect to have “any business relationship with a person established in a high-risk third country”?

Money laundering legislation can be viewed here.

Guidance for AMPs can be viewed here.

Many major UK art institutions – including the British Museum, National Gallery and Tate – are governed by acts of parliament that set strict limits on deaccessioning. These institutions hold collections in trust for the public, meaning they generally cannot sell or otherwise dispose of objects except in very limited circumstances.

For example, Section 3 of the British Museum Act requires the British Museum to “keep the objects comprised in” its collections, except in so far as the trustees “may consider it expedient to remove them temporarily for any purpose connected with the administration of the museum”.

Sections 5 and 9 prevent the British Museum from disposing of objects except (for example)  if they are duplicates, unfit for retention or can be legally transferred to another public institution.

The National Heritage Act 1983, which applies to institutions such as the Victoria and Albert Museum and the Science Museum, generally prohibits disposal except in specific limited cases – namely if the objects being the property of the museum are duplicates or are irreparably damaged.

In recent years, moral and political questions have arisen on these issues, with the most high-profile instance being the ongoing debate for returning the Parthenon sculptures to Greece. Pragmatism and politics on this issue have become considerations as equally important as the strict legal position.

A central feature of English copyright law (as in many other jurisdictions) is that copyright arises automatically on works which qualify as copyrightable. The creator does not need to do anything further to have such rights. The work just has to qualify as and pass the threshold of being “original”.

Traditionally, in English law the threshold for originality has been seen as not very high. This has meant that many photographs automatically qualify for copyright. As the government’s intellectual property office has stated, “photographs, illustrations and other images will generally be protected by copyright as artistic works”.

However, recently a case in 2024 led to some foreseeing the possibility of the (relatively low) English threshold of originality being updated to the European threshold, traditionally seen as somewhat higher. Nonetheless, it remains to be seen whether there will be any further judicial or legislative developments in this area.

If a photograph is not subject to copyright protection, others are generally free to copy it.

The photographer may choose not to publish the photograph, in which case they could – upon approach by an interested party looking to make use of the photograph – seek to restrict  terms of use of the photograph by way of restrictive contractual provisions.

Non-fungible tokens (NFTs) utilise blockchain technology to tie ownership to certain assets. The “non-fungible” nature of an NFT denotes each individual token’s uniqueness.

In comparison, a “fungible” token is something that could be swapped for another of identical value and nature – for example, cryptocurrencies such as Bitcoin and Ethereum are made up of fungible tokens. Consider having two £1 coins, one in each hand – one could switch them and this will have made no difference to the value in each hand.

NFTs, rather, are each unique, as indicated by signifiers such as its metadata and token ID – digital signs of an NFT’s individuality. Consider having a painting with its own unique title and provenance – one could swap it with a similar-looking or even identical picture, but the values of the two will not intrinsically be the same.

Uses and Value of NFTs

NFTs have a number of established uses – such as:

• digital art;
• music; and
• collectibles.

The application of this technology may see even broader usage in the future.

Like all assets, a number of factors can affect the value of an NFT – such as:

• supply;
• usage; and
• the reputation of a creator.

Buying and Storing NFTs

NFTs are mostly bought through NFT marketplaces – the most widely used being OpenSea. A key thing to note is that the purchase of NFTs is usually made through the use of cryptocurrencies.

NFT marketplaces may incentivise purchasing NFTs with cryptocurrencies by including processing fees for regular currency, or by having exclusively cryptocurrency-based transaction options.

Once purchased, NFTs are stored in NFT-compatible digital wallets, where they can then be transferred through sales or trades.

Inauthentic and counterfeit NFTs might come in a number of forms:

• inauthentic NFT-purchasing sites may claim to be selling NFTs, when in reality what they are selling does not have the requisite blockchain records or other indicators of a legitimate NFT;
• counterfeit NFTs might come in the form of a seller intentionally imitating a project by another individual NFT creator or group of creators; and
• they may also appear as artworks stolen from the original artist, who might not have given permission for their work to be distributed as an NFT – verified NFTs will usually have a verification mark indicating their legitimacy.

Ultimately, NFTs are assets – one should perform the same sort of due diligence as for anything else one might invest in.

How to Avoid Falling Into These Traps

Only purchase NFTs from sites that you are certain are authentic, and make sure to check the provenance of any NFT you plan on purchasing.

Ensure that you are confident that the NFT’s usage is legitimate and licensed, and that its price reflects similar NFTs – scammers often try to undercut legitimate NFT projects and advertise through unsolicited messages and emails.

The generational transfer of artwork is a complex and delicate process that requires careful planning and expert advice.

A crucial first step in planning the transfer is to accurately determine the value of the artwork by obtaining professional appraisals. This helps assess the potential UK inheritance tax (IHT) liability, and to identify applicable exemptions and reliefs, which will guide decisions on retention, sale or transfer.

In addition to the legal and tax considerations, practical factors such as storage, insurance, conservation and provenance documentation are all essential for maintaining the artwork’s value.

When planning for the generational transfer of artwork, individuals should seek legal advice to ensure that the artwork is preserved and transferred in line with the artist’s or collector’s testamentary wishes, in order to minimise any potential claims or issues on death.

In the UK, intestate (when someone dies without a will) and testamentary (when someone dies with a will) succession of artwork can raise a variety of legal and fiscal issues. These issues can affect both the distribution of the artwork and the UK tax liabilities for the estate.

Intestacy Succession of Artwork

When an individual dies intestate, their estate, including artwork, is distributed in accordance with the intestacy rules. The legal issues include disappointed beneficiaries and potential disputes over ownership and provenance, especially if the records are incomplete. It has been more than 50 years since Pablo Picasso’s death in 1973, and to this day, the absence of a will has led to his descendants having to manage his estate’s costly legal issues and authenticating some of his artwork.

Verifying ownership and provenance can be complex, and trustees or administrators must navigate the legalities of valuing, managing and distributing the artwork. Fiscal issues include IHT liability and potential UK capital gains tax (CGT) liability when artwork is later sold by the beneficiaries.

Testamentary Succession of Artwork

Testamentary succession provides for more control when there is a legally valid, well-drafted will, which outlines the deceased’s wishes regarding their estate and artwork. The will should appoint knowledgeable and capable executors and trustees who understand the complexities of managing and transferring valuable artwork. Legal issues could arise if the deceased did not obtain the appropriate legal advice.

Similarly, fiscal issues include IHT liability; however, testamentary succession offers opportunities for UK IHT tax planning, including identifying the available exemptions and reliefs, and guiding decisions on retention, sale or transfer. Conditional exemptions may apply to certain artwork if deemed of national, scientific, historic or artistic interest, offering relief from IHT if they are made publicly accessible.

There are UK tax incentives that allow artwork to pass in a tax-efficient way, while also enabling the nation to enjoy the artwork. These UK tax incentives apply to assets that are considered pre-eminent. Pre-eminence is a status that is granted to outstanding artwork (and other objects) that are of importance for national, scientific, historic or artistic reasons.

UK Tax

IHT

If artwork is donated during the donor’s lifetime, it may be subject to IHT, depending on the value of the artwork and the donor’s total UK estate. Gifts made more than seven years before the donor’s death are generally exempt from IHT. However, gifts made within seven years of death may be subject to IHT, with the tax payable decreasing on a sliding scale. If the donation is made to a qualifying museum or gallery, it may be exempt from IHT under the Acceptance in Lieu Scheme (see below).

CGT

Donating artwork to a qualifying museum or gallery may be treated as a disposal for CGT purposes. If the artwork has increased in value since the donor acquired it, they may need to pay CGT on the gain. However, gifts to qualifying museums or galleries are generally exempt from CGT.

Gift aid

If the artwork is donated to a qualifying museum or gallery, and if the donor is UK tax-resident, the donor can benefit from a reduction in UK income tax and CGT liability of up to a maximum of 30% of the agreed value of the artwork under the Cultural Gifts Scheme (see below). The donor also has the added satisfaction of seeing their artwork on display in a public museum or gallery in their lifetime.

Schemes

Acceptance in Lieu Scheme

If pre-eminent artwork is accepted by a qualifying museum or gallery, it can be used to pay (wholly or in part) the IHT liability (through HMRC’s Acceptance in Lieu Scheme). This Scheme means that many important artworks remain in the UK and are protected for the enjoyment of the nation.

Cultural Gifts Scheme

This Scheme is specially designed to encourage goodwill among artists and collectors, and allows pre-eminent artwork to be donated to a qualifying museum or gallery in exchange for a UK tax reduction.

On death, if valuable artwork forms a major part of a deceased estate, the individual will be subject to a significant UK IHT liability.

Artists or collectors who wish to pass their artwork to their descendants after death must consider the IHT implications. Individuals are subject to IHT on their estate, which includes artwork. IHT is charged at 40% on assets above the nil-rate band, which is currently GBP325,000, and subject to any other available reliefs or exemptions.

However, the Conditional Exemption Scheme allows the deferral of IHT and CGT for artwork deemed to be “pre-eminent” for national, scientific, historic or artistic reasons. The new owner must agree to keep the artwork in the UK, preserve it and provide reasonable public access to it, typically for at least 28 days per year. If these conditions are breached or the artwork is sold, IHT or CGT will be due.

Placing artwork in trust is designed to preserve artwork for future generations, ensuring continuity and management while potentially benefiting from UK tax exemptions and reliefs. Artwork can be purchased by a trust itself or a vehicle owned by a trust, and the trustee(s) will hold the artwork for the benefit of the beneficiaries according to the terms of the trust.

It is essential to consider the fiscal issues – such as UK IHT, CGT and income tax – when structuring the trust. If a UK tax-resident beneficiary personally enjoys the artwork, ongoing UK tax charges may apply.