Memorandum submitted by the Goodison Review
I have the privilege to act as Chairman of a
small group of lawyers and museum curators who have come together
in support of regional and national collections to help them preserve
and acquire works of art and culture of significance and to look
at ways of making such items available to the public. A list of
the members of the group is attached.
I am today sending you by e-mail an introductory
memorandum together with four papers produced by the groupThe
Future of Conditional Exemption for Heritage Chattels, Possible
Modifications to Administrative Practice relating to negotiated
sales of Objects to Institutions, Proposals for UK Tax Relief
on Donations of Cultural Property, and a paper summarising
the Austrialian Cultural Gifts Programme (not printed here).
The Group, a voluntary group of specialists,
made up of legal advisers, curators of public collections, and
others, was formed in 2004 following the Goodison Review to consider
the recommendations and to research and refine them so far as
desirable and to put the recommendations as so refined to the
Treasury. The overriding objective is to suggest ways in which
objects and works of art of importance to the national heritage
can best be preserved and retained in this country.
1. These papers are submitted in the context
of the fifth and sixth issues in respect of which the Committee
has indicated that it is particularly interested in receiving
evidence: funding, and the maintenance of the nation's heritage
via official, charitable and other organisations.
In this field longstanding Government policy
has two basic objectives:
(i) To encourage the retention of such chattels
in private ownership in this country.
This has been confirmed recently in the following
"Successive governments have taken the view
that, amongst other things, chattels of national, artistic, historic
or scientific interest form an integral and major part of the
cultural life of this country. Their view has been that this national
heritage should be conserved and protected for the benefit of
the nation as a whole.
Their view has been that, so far as possible,
property of this kind should remain in private ownership and that
those owners should be encouraged to retain and care for the property
and display it to the public."
(ii) To provide incentives to a disposing
owner to do so in favour of a public . . . museum.
Policy in this respect has been stated as follows:
". . . where this [retention in private
ownership] is no longer possible the owners should be encouraged
to dispose of it to those bodies in this country which have been
set up specifically to hold such property in trust for the community."
2. In the past the relief accorded by conditional
exemption from capital taxation on death and otherwise has been
seen as a prime means of meeting the first objective, with acceptance
in lieu of tax and the private treaty sale dispensation fulfilling
a similar role in meeting the second. The existing reliefs are
founded in the distant past.
They are in need of wholesale reappraisal if they are to play
any significant role in contemporary conditions in stemming the
outflow of heritage chattels from this country. This is against
a background of a dearth of funding from central government towards
the acquisition of such works of art by museums, and a reduction
of Lottery support towards such acquisitions.
3. The rundown of Lottery support is likely
to be exacerbated in the continuing erosion of the principle of
additionality recently noted by the Committee.
It will certainly flow from the already announced divesting from
the Heritage Lottery Fund and other "good causes" over
the period 2009-12 of an estimated £410 million as part of
the review of current Lottery licences,
and the establishment of the new Olympic Lottery Game, designed
to raise a further £750 million for the Olympics, thereby
inevitably substantially reducing the likely receipts from the
existing Lottery games upon which the HLF is reliant for its income.
2. THE ENCOURAGEMENT
(This paper was submitted to the Chief Secretary
to the Treasury on 6 October 2005, but no substantive response
has been received from the Treasury in regard to its contents.)
1. It will be seen from the Appendix to
the Paper that a survey carried out by the Group in the Summer
of 2005 among solicitors known to advise owners of heritage chattels,
shows that following the changes made to conditional exemption
under Finance Act 1998, the vast majority of those surveyed retain
no enthusiasm for the present exemption regime. This is in sharp
contrast to their perceptions of the previous exemption dispensation.
Such evidence would seem to demonstrate that in its present form,
conditional exemption is unlikely to provide a meaningful alternative
following a new death or other taxable event to the disposal of
heritage chattels in the open market, and the likelihood that
many such items will be exported following sale.
2. The paper underlines (see Part 1, paragraph
2) that such concerns arise not only in regard to existing historic
collections, but also in regard to new and emerging collections.
It emphasises (see Part 1, paragraph 5.3) the strongly held perception
of the Group that in its insistence on the qualitative criteria
of "pre-eminence" the current dispensation is elitist,
in conflict with 21 Century requirements of diversity, and the
need to have regard to the opinion of stakeholders. Finally (see
Part 1, paragraph 5.4) it records the view of the Group that current
arrangements for ensuring public access to exempt chattels are
unrealistic and against the national interest.
3. In its recommendations the Group puts
forward (Part II, para 2) modern qualitative criteria for exemption,
with new proposals to give "open access" (Part II, para
3), and "virtual access" (Part II, para 4) to the public
to exempted items. Revised arrangements of the kind proposed are
seen as likely to provide both the public at large and cognoscenti
with a better opportunity to appreciate and inspect exempt chattels
than under current arrangements. At the same time it is thought
that the proposals would allay the understandable concerns of
owners and their advisers in regard to the current public access
regime, thereby securing renewed confidence in conditional exemption
and with this, reinstatement of the arrangement as a real defence
against the dispersal abroad of heritage chattels following a
death or other taxable event.
3. THE PROVISION
(Papers B1 and B2 were submitted to the Permanent
Secretary to the Treasury on 22 October 2004. Paper B3 was submitted
to the Permanent Secretary on 19 November 2004. No substantive
response to the papers has been received.)
1. The existing direct taxation incentives
for acceptance in lieu of tax and private treaty sale are administered
by HMRC Capital Taxes. The relevant legislation offers a bare
framework for the operation of these dispensations, and much is
left to the exercise of discretion by Capital Taxes. Treasury
instructions to HMRC appear to be to exercise such discretions
in a manner calculated to restrict the scope for completed transactions.
2. The Group's paper B1 was prepared to
draw attention to areas where a "loosening up" of administrative
discretion would increase the flow of acceptance in lieu and of
private treaty sale transactions in regard to heritage chattels.
To take one fairly graphic example (see paragraph D2 of the paper):
it is impossible for a "stranger" to offer his heritage
chattel in satisfaction of someone else's capital taxation debt.
For example, if one of the executors of a will, having no interest
in the estate as a beneficiary, is prepared to offer in satisfaction
of the tax debt of the estate, his personally owned Rembrandt
painting long coveted by the National Gallery, Capital Taxes will
not admit such an offer to be competent. On the face of it, given
that the concluded acceptance in lieu of the painting would both
settle the tax debt of the estate and at the same time secure
the Rembrandt for the National Gallery, such an attitude seems
3. The current acceptance in lieu dispensation
only enables inheritance tax or estate duty debts to be settled
by cession of heritage chattels to the nation. Paper B2 makes
detailed recommendations for the extension of such a facility
to settle capital gains tax, income tax and corporation tax debts.
Arrangements of this kind exist in a number of countries, notably
Australia, France and the United States. The Australian arrangements
(for details see Paper B3) have operated successfully for more
than 25 years, and these and the existing UK "gift aid"
and related reliefs
are seen by the Group as the basis of a system enabling capital
gains tax, income tax and corporation tax debts to be settled
by cession of heritage chattels to the nation. The desirability
of extending "offer in lieu" in this way into the realms
of capital gains tax, income tax and corporation tax, in the light
of the difficulties faced by public museums in obtaining funding
to make acquisitions, is but one facet of the proposal. Another
is simple logic. Since its introduction in regard to cash gifts,
"gift aid" has been expanded to embrace transfers of
and certain gifts in kind.
Thus no great quantum leap would seem to be required to embrace
its extension in the tax code to transfers of heritage chattels
to public institutions.
1. The concerns of the Group are highlighted
by the evidence of the continuing outflow of major heritage chattels
from this country contained in the most recent Report of the Reviewing
Committee on the Export of Works of Art. This records that over
the year 2004-05 of the items before the Committee 65% in terms
of value (£30.2 millions worth) were exported, and only 12%
(£5.6 millions worth) were "saved" by purchase
by a UK based public institution or private individual.
2. The Treasury response to the Goodison
in the area of direct taxation as explored by Sir Nicholas and
fleshed out in the Group's papers has either been wholly negative
or deafening in its silence.
Given existing and anticipated difficulties for public museums
in securing funding for the acquisition of heritage chattels,
the case for the urgent reappraisal of existing direct taxation
incentives designed to facilitate the retention of such chattels
in this country would seem overwhelming.
3. None of the measures outlined in the
attached papers call for direct funding.
18 January 2006
30 HMRC Inheritance Tax Manual paragraph 21048
under the head "Conditional Exemption". Back
Capital Taxation and the National Heritage Board of Inland
Revenue, December 1986, page 1 at paragraph 1.1. Back
Conditional exemption from tax for chattels was first introduced
by Finance Act 1896 s20, acceptance in lieu of tax of chattels
by Finance Act 1953 s30, with the private treaty sale dispensation
first appearing in Finance Act 1921 s44. Back
National Art Collections Fund paper The Acquisitions Problem
July 2005, reports that the income of the HLF has declined
by some 41% since 1997, and that in 2004-05 only 0.46% of HLF
expenditure went towards supporting museum acquisitions. Back
See the Committee's Report Reform of the National Lottery
5th Report of Session 2003-04, HC 196-1, 25 March 2004, Vol
1, paragraphs 157-165 at pages 53-54. Back
Ibid Vol 1, paragraph 132, and HLF The London Olympics
28 July 2005 Back
Ibid Vol 1, paragraphs 131-2 and 137. Back
"Gift aid" was introduced by Finance Act 1990 ss25-26. Back
For "share aid" see Income and Corporation Tax Act
1988 ("ICTA") s587B, introduced by Finance Act 2000
For "land aid" see ibid. Back
For the relief for equipment given to educational establishments
see ICTA s84, introduced by Finance Act 1991 s68 and for gifts
of trading stock and assets see ICTA s83A introduced by Finance
Act 1999 s55. Back
Reviewing Committee Report for 2004-05, pages 2-4. The
remaining 22% in terms of value (£10.4 millions worth) were
retained in the UK for the present, simply because the would be
exporters withdrew their applications for a licence. Back
A report to the Treasury, Securing the Best for our Museums:
Private Giving and Government Support, January 2004. Back
See Government response to the Culture, Media & Sport Select
Committee, A Report on the Market for Art, HC414, Session
2004-05 CM6643 July 2005, page 4. Back
The sole direct taxation "change" arising from the
Goodison Review (See Recommendation 39) is the publication of
a new page in its Business Income Manual by HMRC giving guidance
on the treatment of the costs of maintaining and facilitating
public access to a business archive in computing taxable profits.
(See BIM 42501-Specific deductions: administration: business archives).
This does little more than confirm the uncertainties of the law
in this area. Back