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  • Writer's pictureInchmead

Tax tips when donating culturally significant assets

Here's a bit of tax planning that most of us don't have to think about: donating culturally significant assets.

Vanina Wittenburg, senior associate at Hunters Law LLP, considers the options for donating important objects to the nation from gardens to textiles and jewellery, either during a taxpayer’s lifetime or on death, with an eye on effective tax planning.

Heritage work, and in particular the preservation of culturally significant assets for the benefit of the nation, is one of the most fascinating aspects of my work as a private client lawyer. This topic hit the headlines recently because of the exciting news that Munstead Wood, the former residence of one of the best and most well-known English gardeners in history, Gertrude Jekyll, with a garden designed by her and a house designed by Sir Edwin Lutyens, had been bought by the National Trust.

Although in the case of Munstead Wood it appears that an ad hoc agreement was reached between the owners, the National Trust and the government, there are a number of established schemes in place for the gifting of culturally significant assets which are available to taxpayers.

The fact that a garden can be preserved as a historically significant asset has started me thinking about the flexibility of the schemes, and how to access those schemes where it is not so obvious that an item might be significant.

All of these schemes require the asset proposed to be donated (which could be property, land or an object) to be ‘pre-eminent’, meaning that it must be of national, scientific, historic or artistic importance. It also has to be associated with a historic building in public ownership (including those owned by the National Trust or English Heritage), but that should not be taken to mean that it is only paintings or sculptures that can be donated.

In recent years donations through some of the schemes have included textile collections, religious artefacts, jewellery, musical instruments, antique coins, silverware, letters or other archives, fine furniture, clocks, ceramics (including a floor tile), weaponry, land, as well as Stephen Hawking’s office, in its entirety.

There is clearly huge scope in terms of the types of items that will be accepted, which is good news for individuals with unusual collections.

Tax exemptions

It is worth summarising the current government schemes, as follows:

  • The Acceptance in Lieu (AIL) scheme, by which pre-eminent objects can be offered to a public institution in full or part payment of a liability to inheritance tax on a taxpayer's death. The scheme’s aim is to ensure that pre-eminent assets of significant cultural heritage remain in the possession of the nation for the benefit of all citizens, rather than be sold privately and withheld from public view or even relocated outside the UK.

  • The Cultural Gifts scheme, which allows pre-eminent objects to be donated to public institutions during an individual’s lifetime (or by a company) in exchange for a reduction in liability to income tax, capital gains tax or corporation tax. The decision regarding whether items are deemed pre-eminent is also made by the panel, which bases its decision on the same criteria as for the AIL scheme. 

  • Conditional Exemption, by which gifts of property (either land or objects) which is deemed important to the UK’s national heritage and which would normally be chargeable (ie, where the asset is retained in private ownership) can have their inheritance tax liability deferred, provided that certain conditions relating to public access and preservation are continuously met.

It is also worth noting that objects can be left to charity by Will, or gifted to a charity during a taxpayer’s lifetime, without any inheritance tax being incurred thanks to the charitable exemption. However, by utilising the Cultural Gifts or Acceptance in Lieu scheme, the taxpayer can benefit from an additional reduction in their remaining tax liability, and therefore it is worth pursuing one of these options over a simple charitable gift.

There are a number of options for donating important objects to the nation, either during a taxpayer's lifetime or upon death. One of the biggest takeaways from recent conversations with heritage professionals is that pre-eminence can be interpreted extremely widely, as shown by the non-exhaustive list of items which have been accepted into the schemes in recent years.

This means that if a taxpayer owns an item which they think has played a role in the nation’s history (no matter how random the item may seem), there is no reason not to investigate whether it could be donated to the nation.

About the author

Vanina Wittenburg, senior associate at Hunters Law LLP


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