Wednesday 19 October 2011

Proposed UK government scheme encourages art gifts to the nation

Joseph and Potiphar’s Wife, given
under the Acceptance in Lieu scheme
The UK government is currently pondering the responses given to its recent consultation, the snappily titled ‘Gifts of pre-eminent objects and works of art to the nation’. It is hoped that the scheme will encourage lifetime gifts of art to the nation in return for tax breaks (complementing the existing Acceptance in Lieu of Tax scheme, which encourages giving by reducing inheritance tax).

The idea is that a prospective donor will offer a work of art to the government. A panel of experts will then judge whether the work is ‘pre-eminent’ or merely nice. If the former, the panel will value the work and the donor will gain a tax deduction of (it is suggested) 25% of that value. Broadly, the nation gets 75% of the work for free, the donor saves tax, and everyone’s happy.

Respondents to the consultation have, however, pointed out a few possible flies in the ointment. These include the following:
• although the donor can express a preference as to where the work of art goes, they won’t be given the final say. Some donors may not care for the idea that they cannot be sure that the work will go to their preferred charity;
• donors may find it more tax advantageous to simply sell a work of art and make a Gift Aid donation of the profits after tax to their chosen charity. This would also enable a donor to be sure that their gift benefits the charity of their choice;

• the scheme’s cap of £1m per object and £2m per donor in tax deductions may deter owners from donating more valuable objects; and 
• where inheritance tax on an object has been deferred under a conditional exemption, and the object is then donated under the scheme, inheritance tax on that object could then become payable.
We look forward to discovering how far these concerns will influence the final shape of the scheme. Draft legislation is expected in early December.

To see the full consultation, click here.

Written for Art & Artifice by Elizabeth Emerson (thanks!)

No comments: