Finance Bill

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Mr. Flight: I beg to move amendment No. 90, in page 72, line 17, leave out 'and'.

The Chairman: With this it will be convenient to take the following amendments: No. 208, in page 72, line 18, leave out 'land' and insert 'property'.

No. 91, in page 72, line 18, at end insert

    '; and

    (f) a qualifying work of art'.

No. 209, in page 72, line 23, at end insertó

    '(9AA) In this section a ''qualifying interest in property'' meansó

    (a) a qualifying interest in land, or

    (b) tangible moveable property.'.

No. 92, in page 72, line 32, at end insertó

    '(9D) In this section ''qualifying work of art'' shall mean any object or group of objects designated by the Secretary of State, either specifically or as a class, and the provisions of section 31(1)(a), (aa), and (e) of the Inheritance Tax Act 1984 shall apply for the purposes of determining the category or class of object to be so specified as they apply for the purposes of that Act.'.

No. 210, in page 72, line 36, leave out 'real' and insert 'other'.

No. 207, in page 74, line 8, leave out 'land' and insert 'property'.

Mr. Flight: The Conservative party greatly welcomed the introduction of tax relief on gifts of listed securities. I believe that the measure was based on the success of the experience in the United States, and we argued that if Britain was following that, there was a powerful logic for including property and art treasures. Therefore, we are pleased that the Government have now added property. If they do not accept our arguments for including art treasures this year, we look forward to a clause in next year's Finance Bill that adds art treasures and unlisted securities.

Amendment No. 91 would allow a gift of a qualifying work of art by adding a new category to the existing list of qualifying assets in section 587B, in which land is now included under clause 96. Amendment No. 92 would give effect to that by defining a qualifying work of art by reference to existing criteria that apply to certain designated works of art and that are applied for the purposes of exemption from inheritance tax. The intention is not to limit the relief to the same items but to introduce a process whereby the Secretary of State for Culture, Media and Sport could designate individual works of art, or works of art as a class, qualifying works of art.

Art galleries and charitable organisations have widely welcomed the amendment. Alex Beard, a director of the Tate, has said that it would

    ''encourage lifetime donations of works of art to galleries and to national collections.''

I shall say more on that in a moment. James Evelyn of the Charities Tax Reform Group has rightly pointed out that other assets that do not fit into the broad categories of listed securities, property and works of art would also be incredibly valuable if they were

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gifted under the scheme to charities; for example, computers, motor vehicles, intellectual property and, as mentioned earlier, unlisted securities.

Under existing rules, the owner of a valuable work of art who wishes to donate the asset to a charity cannot benefit from gift aid unless the asset is sold and the cash donated to a charity. That expensive and inefficient approach results in works of art not ending up in a national collection. The existence of a relief from inheritance tax through the assets in lieu of tax scheme creates a perverse incentive to retain works of art until death. In practice, few major works of art are donated during the owner's lifetime.

Extending tax relief to such gifts in kind would constitute a major step forward in helping public museums and galleries to expand their holdings. It would provide an additional impetus to encourage donations of valuable assets to other charities. In a rather circular business, at present deals are done over inheritance tax on works of art. There is a scramble to collect the money to purchase the work and keep it in the country. In one way or another, Government agencies put up most of the money. In the round, extending the measure to works of art would actually be modest in cost terms, because it would provide a simple, reasonably attractive mechanism for gifting works of art.

I anticipate that the Government do not want to do that yet, and that their principal objection to it will be based on the costs and risks to the Exchequer. They will argue that no ready market exists for many works of art, as it does for quoted shares or, less arguably, for land, and that both the donor and those receiving donations have an incentive to maximise the value and increase the tax relief available. The amendment addresses that objection. It would not extend relief to all works of art because that could give rise to difficulties of definition. It would adopt the provisions of the Inheritance Tax Act 1984, which allows the Treasury to designate the works of art that benefit. That allows negotiation of agreement in relation to works of art of national importance and provides reasonable protection to the Treasury against abuse. Parallel arrangements work extremely satisfactorily in the United States; there, equivalent relief for tax purposes relies on the evaluations by an expert panel of gifts of works of art.

The anticipated objections are therefore dealt with by case-study experience in the United States and by the amendment's provisions. We should like to know the Government's reasons for adding land but not biting the bullet and adding works of art. The Government may not accept our argument this year, but we think that it will be on the agenda next year.

3.15 pm

Mr. Davey: I rise not only to support the hon. Gentleman's amendments, but to speak to the amendments in my name and that of my hon. Friend the Member for Torridge and West Devon (Mr. Burnett). Our amendments, Nos. 207 to 210, are somewhat broader than the amendments of the hon. Member for Arundel and South Downs, which focus primarily on works of art. Ours were suggested

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by the Charity Tax Reform Group and would go further by granting relief to donations to charities for a range of chattels.

The amendments follow the same lines as the Government's moves in this and previous Finance Bills. The Government are to be congratulated on expanding tax relief for charitable donations and, as the hon. Member for Arundel and South Downs said, on what they are trying to do in the Bill. In reforming the tax system for charities, they want to focus on income by achieving greater levels of new giving. To a certain extent, they have been successful in doing that in the new tax relief for donations of securities, which is presumably why they are taking it a step further today. However, I should like them to pursue the total logic of their policy by including all the chattels that could be tax relievable under to the amendments.

Given that the amendments are along the same lines as Government thinking, why would the Government not accept the amendments? The hon. Member for Arundel and South Downs suggested that cost might be the answer. However, whether the cost were £5 million or greater, I do not think that that is at the back of the Government's mind because they have shown themselves to be extremely generous, over many Finance Bills, in encouraging new giving to charitiesóI make no bones about that. Compared with the Government's previous generosity, the extra provisions in the amendments are small. The Government must explain why they will not go the whole hog and give relief to the many variants of donations to charities.

In trying to answer that question, I wondered whether the Government were worried about administrative costs. Perhaps there are difficulties in making valuations of all the different assets that could be donated to charities. The hon. Gentleman talked about computers and vehicles. We could mention furniture, antiques, or a range of different items that could be gifted to charities, and tax relief could be granted on them. Perhaps the Government are concerned that lots of official time would be tied up in working out the value of those items to determine what the tax relief should be. I should be surprised if that argument would withstand much scrutiny, because in many other areas of tax administration, tax officials produce such evaluations, and they do so according to guidelines and standards. Therefore, I cannot see why that should be an overriding objection. Perhaps it would take a bit of extra work to find out how new evaluation techniques could be applied in this area, but I suggest that the work would be worth while.

There are added advantages of extending tax relief for such donations. Many assets that I mentionedócomputers, scientific equipment, motor vehicles and so onócould be of great value to charities if they were donated, and if the number of donations increased. The route currently open to peopleórealising the asset, getting the cash and donating it onówould not be as valuable as giving the gift in kind. If one went down the route of realising the assets, capital gains tax might be payable, the administrative costs and hassle involved would be a significant barrier and the value of

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the cash might mean less to the charity in terms of benefits than the asset itself. The second-hand value of the asset might be more beneficial to the charity.

I urge the Government to consider carefully the development of this interesting series of tax reliefs for charitable donations. They have heritage importance, as the hon. Member for Arundel and South Downs pointed out, in respect of works of art. There are many other gifts in kind, such as antiques, which would have heritage value for the nation. Moreover, by encouraging donations and the reuse of assets, there is an environmental benefit: the assets are not thrown away; they are given to voluntary bodies and charities that can make good use of them for the wider community. Thus an environmental benefit underlies the proposals.

If the Minister does not accept the amendments, which I somehow doubt he will, it would be nice if he could assure the Committee that the Government will think carefully about the amendments tabled by the hon. Member for Arundel and South Downs and by my hon. Friends, and see whether in future Finance Bills, they might seek to widen this generous tax relief a little further.

 
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