The Art of Giving
In the course of his tax planning and probate work Personal Law Partner, Mark Jones, often come across families who have built up a collection of works of art.
Such collections can give rise to some interesting questions.
One such question is how you actually go about giving away a work of art. For example, in one case a son was still living with his parents in the family home and his parents owned a fairly valuable painting. They decided to give it to him and told him that it was his. The painting remained, however, on the wall of the family home and the parents continued to enjoy seeing it there. It was held that the “gift” to the son was ineffective for tax purposes because they had not really given anything away.
In relation to estates, another issue can be how the tax on works of art will be met. It might sometimes be necessary for some of the collection to be sold to raise the tax. In these circumstances, however, certain schemes and exemptions can help. These include:
- The Conditional Exemption Scheme. Under this scheme, works of art can be exempt from Inheritance Tax and Capital Gains Tax when they pass to a new owner if they are of artistic interest and the new owner undertakes to look after the work, allow the general public to view it and keep it in the United Kingdom.
- The Acceptance in Lieu Scheme. Under this scheme tax payers can transfer a pre eminent work of art into public ownership in lieu of some or all of their Inheritance Tax liability. Whether or not a work is pre eminent, and its value will be assessed by independent experts.
- Cultural Gift Scheme. This can allow tax payers a tax reduction on the basis of a percentage of the value of a work or art being gifted to certain recipients (such as museums).
The paragraphs above are a very brief outline of some of the relevant schemes and there is much detail to be considered before taking advantage of them.
If you own valuable works of art and you are concerned by the potential Inheritance Tax bill on them contact Mark Jones for further advice.
Further advice please contact Mark Jones on 01423 502211 or