More UK tax breaks

Last month I reported on the UK government's 'acceptance in lieu' (AiL) scheme.

This week, the Department for Culture, Media and Sport (DCMS) launched the "Cultural Gifts Scheme." The Scheme, which will be administered by the Arts Council, will allow UK taxpayers who own art or collections of heritage objects, which are considered to be pre-eminent, to be donated during their lifetime (rather than after their death, as with the AiL scheme) in return for a tax reduction to their tax liability.

Culture Minister Ed Vaizey has said of the scheme that it "is aimed at encouraging gifts and donations of wonderful treasures to the nation, where they can be enjoyed by all."

How will it work?

A UK taxpayer who owns an artwork which is considered pre-eminent, can offer to donate the work to the Arts Council. The offer will be considered by the AiL Panel (the “Panel”). If the Panel considers that the object is pre-eminent and meets the relevant conditions, they will agree a valuation and then make a recommendation to the relevant Minister (either the Secretary of State for Culture, Media and Sport, the Welsh Ministers, the Scottish Ministers or the Northern Ireland Department for Culture, Arts and Leisure). If the relevant Minister agrees with the recommendation, the object will then be allocated by the appropriate Minister to an eligible museum or gallery. Alternatively, where an offer is made with a wish that the artwork be allocated to a particular institution, the Minister can agreed to the allocation and the object will be transferred to that institution. If the Panel assesses an object as not being pre-eminent, it will be rejected. There will also be an annual limit of £30 million for both the Cultural Gifts Scheme and AiL Scheme. The Panel may also reject a donation where acceptance would cause the annual limit to be exceeded.

Upon formal acceptance of a donation, the Arts Council will send confirmation of the donation to HMRC. HMRC will not apply the tax reduction to a person’s tax liability unless and until the Panel has confirmed to HMRC that the relevant conditions for the tax reduction have been met. The tax reduction will only be available against the income tax and capital gains tax liabilities of individual donors or against the corporation tax liability (including liabilities on chargeable gains) of corporate donors.

DCMS have produced detailed practical guidance on how to make an application under the Cultural Gifts Scheme. This can be found here.