Tax relief on pre-eminent gifts raised to £30m a year
An extra £10m for tax relief on gifts of pre-eminent objects to the nation was announced by the Chancellor in his recent autumn statement, taking the total relief to £30m per year.
The aim is to stimulate lifetime giving. Objects can be loaned or given to appropriate institutions including certain charities and museums for safe keeping and to provide public access. In return donors will receive a reduction in their UK tax liability based on a percentage of the value of the object they are donating.
British Museum director Neil MacGregor said: “The extension of tax relief to lifetime gifts is a great and welcome step forward. The Museum is delighted that the Chancellor could make this helpful gesture to public collections.”
Guidance from the Treasury says the objects can be “a work of art or other item that is of national, scientific, historic or artistic interest”. Donors can offer to give an object with a self-assessed valuation. A panel of experts will consider the offer and agree the value with the owner. If the donor decides to proceed based on this valuation, they will receive a tax reduction. The fixed percentage will be 30% of the agreed valuation for individuals and 20% for companies. Individuals will be able to spread the tax reduction forward across a period of up to five years. However, companies can only reduce their tax liability in the year of the donation.
This new annual tax relief limit will apply to any gifts made under the new scheme to encourage gifts of pre-eminent objects and taxes offset under the existing inheritance tax Acceptance in Lieu (AiL) scheme. The AiL scheme enables estates to offer pre-eminent objects including land, buildings and contents to set against inheritance tax liability based on the value of the items. The new measure will take effect on an appointed day after the Finance Bill 2012 receives Royal Assent.
Stephen Deuchar director of The Art Fund, that helps museums and galleries buy art says: “The new scheme to encourage lifetime gifts of art to the nation is a real step forward, and something museums and the Art Fund have long campaigned for. Great news too that an additional £10m has been allocated to the scheme, which will mean it is more than just words. However, the proposed level of tax reduction of 30% is disappointing – it needs to be 50% to really incentivise donors.”
To download the Treasury guidance for free click here