Many charities transact in art—for example, by running galleries or holding auctions to sell donated and/or consigned art and thereby raise funds.
However, even if a charity has art transactions totalling €10,000, this does not necessarily mean that they’re in scope under the Money Laundering Regulations (MLRs) as an Art Market Participant (AMP).
Does the organisation have a company registered with Companies House?
In the UK, a key factor that determines if a charity is in scope under the MLRs is related to Companies House registration:
- Does the charity have a company registered with Companies House? If the answer is ‘no’, then it is cut and dry: the charity is not caught under scope of the Money Laundering Regulations (MLRs). Therefore, the entity needn’t register for AMP supervision with HMRC nor adhere to AML compliance requirements. Related laws that still apply include, for example: Sanctions Law; Proceeds of Crime Act; and UK GDPR.
- If the answer above is ‘yes’, the next question to ask is this: Is the charity trading in art at the transactional value of €10,000 or above “by way of business”? Keep reading to find out more.
“By Way of Business”—Meaning and HMRC Guidance:
The phrase “by way of business” is not specifically defined in the legislation, yet it is a critical test for whether engaging in art transactions makes an entity an Art Market Participant.
According to the Economic Crime Supervision Handbook ‘ECSH42525 - By Way of Business’ (a publicly available HMRC Internal Handbook - see link below under ‘References’), most businesses “will know if they are carrying out a relevant activity “by way of business,” but there may be circumstances where the business may not be sure.” gov.uk
The handbook states that the following factors should be considered to determine if relevant activity is carried out “by way of business”:
- For a commercial reason (i.e. receiving a payment/benefit, rather than as a charity), where the business receives or is expecting to receive a direct or indirect financial benefit from carrying on this activity.
- On a regular basis.
- At a scale that means that the exemptions in regulation 15 of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) don't apply, then they're within the scope of MLR 2017 and must register and comply with other MLR 2017 obligations. For more information on exemptions see ECSH43510.
Important note: If the answer to all of the above questions is ‘yes’, then the business is carrying out the activity “by way of business” and will need to register as an AMP and therefore comply under the MLRs.
Charity examples for your consideration:
- If a charity’s involvement with art (such as occasional art sales or exhibitions) is purely for its charitable purpose and not run as a commercial enterprise, the charity is generally not required to register as an AMP.
- For example, a museum charity selling a painting from its collection as a one-off to fund new exhibits, or a charity auctioning a donated artwork at a gala (with the sale facilitated by an auction house), would likely not be deemed to be trading in art “by way of business.” In the latter scenario, the auction house acting as intermediary would itself be the AMP responsible for AML compliance, not the charity seller.
- If a charity’s activities do resemble those of an AMP – for instance, by regularly buying and selling art in the open market, or acting as an art dealer or broker as a means of generating revenue – then it may cross into “by way of business” territory. The threshold of €10,000 (approximately £8,500 as a rough equivalent) is key: any single art transaction at or above this value (or series of linked transactions) could trigger the AMP definition.
The role of trading arms and separate entities:
Many charities conduct revenue-generating activities through a trading subsidiary – usually a separate company owned by the charity – to comply with charity law and tax requirements. It is important to understand how this structure affects Art Market Participant status:
- If a charity itself (the parent charity) does not directly engage in art sales by way of business – for example, it channels all art transactions through its subsidiary – then the charity would typically not need to register as an AMP. As HMRC notes, most charities are not in business, and often “if a charity has a trading arm as a separate legal entity, that trading arm may be an AMP” (while the charity remains outside scope). gov.uk
- The trading subsidiary, on the other hand, is usually a normal commercial company (even though its profits go back to the charity). If that subsidiary is dealing in art above the €10k threshold as part of its business, it does qualify as an Art Market Participant in its own right. The subsidiary company would need to register with HMRC and fulfill all AML obligations applicable to AMPs.
- In group structures, clarify which entity is conducting the art trade.
Conclusion: Proactive compliance
If your charity deals in high-value art, take the time to evaluate your activities against the AMP criteria. When in doubt, err on the side of caution and get in touch with the ECS Registrations team at HMRC via ecsregistration@hmrc.gov.uk. By clarifying your status, documenting your decisions, and adhering to best practices, you can ensure your organisation remains on the right side of the regulations while fulfilling the charity’s mission.
References:
ECS Internal Handbook ECSH42525—By way of business: https://www.gov.uk/hmrc-internal-manuals/economic-crime-supervision-handbook/ecsh42525
ECS Internal Handbook ECSH43510—Exclusions and exemptions: introduction: https://www.gov.uk/hmrc-internal-manuals/economic-crime-supervision-handbook/ecsh43510
ECS Internal Handbook ECSH54525—Introduction to Art Market Participants:
ECS Internal Handbook ECSH42575—Charities and voluntary organisations:
https://www.gov.uk/hmrc-internal-manuals/economic-crime-supervision-handbook/ecsh42575
Continue reading:
ArtAML’s preparatory guide for registering as an Art Market Participant (AMP): https://knowledgebase.artaml.com/artamls-preparatory-guide-for-registering-as-an-art-market-participant-uk