The Lifetime Giving One: The Cultural Gifts Scheme
This scheme was created to encourage lifetime donations by owners of pre-eminent items to cultural institutions.
The benefit for individuals is the opportunity to receive a tax credit equal to a maximum of 30% of the agreed value of the item to use against a liability for Income Tax and Capital Gains Tax (CGT). The credit can be used all at once or spread out across five years from the tax year in which the offer is made.
The scheme is also open to companies. Companies with a liability to Corporation Tax can receive a tax reduction of up to a maximum of 20% of the value agreed for the item. Companies may not spread the credit over tax years but must use it in the tax year in which the offer is made.
Subject to the rules and exceptions contained within Schedule 14 to the Finance Act 2012, the donor will not be liable for CGT or IHT on the gift.
The Kicking-It-Down-The-Road One: The Conditional Exemption Tax Incentive Scheme
When an item of pre-eminent importance is passed to a new owner, either by gift or by inheritance, the Conditional Exemption Tax Incentive Scheme provides an opportunity to defer the IHT or CGT due on that item.
In order to be able to benefit from the scheme the owner must provide undertakings. These are (a) to retain and to preserve the item (b) to keep the item in the UK except for an approved purpose and period, and (c) to make the item available for visits by members of the public.
If the item is to be transferred during lifetime (outright gifts, or gifts to trusts) the donor must have owned the property for at least six years prior to the transfer. For items transferred on death no minimum periods of ownership apply.
The item must be available to the visiting public for at least 28 days of the year and, outside of those days, available for visit by appointment.
The Payment-in-Kind one: The Acceptance in Lieu Scheme
This scheme provides individuals (often executors of an estate) an opportunity to meet an IHT liability in kind by offering pre-eminent items to the nation in lieu of IHT due. It is designed to provide an alternative avenue to selling the item on the open market to meet the tax and, thereby, to facilitate greater public ownership of items of national importance. A special feature of the scheme is the douceur, an added incentive to a potential offeror, consisting of a bonus 25% “cash-back” calculated against the IHT that would normally have been due.
Conclusion
As values for art increase so does the appetite for good advice. Armed with some of the information above I hope that you will be able to assist your clients to have their art in the right place.
