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Paintings, drawings and other works of art and objects, outstanding land and buildings can be used instead of cash to pay inheritance tax or one of its predecessors. Not only will an offer in lieu normally be of greater financial benefit to the owner than an open market sale that entails payment of tax, but it also ensures that assets of national importance are preserved, in the UK, for the public benefit. The objects have to be of outstanding national or local importance or associated with a building in public ownership; land and buildings have to be outstanding. The scheme is a key element in the government's strategy to ensure that the most important of the nation's cultural objects remain within the UK and become accessible to the public, and it is one of the most successful ways of utilising the generosity of the Treasury.

Individuals and corporations in the UK can benefit from a special tax dispensation when they dispose of important cultural objects, outstanding land and buildings. It is an arrangement that has helped museums and institutions such as the National Trust to acquire many significant artworks and buildings that might otherwise have been beyond their reach. Privately negotiated sales to those bodies listed in Schedule 3 of the Inheritance Tax Act 1984 are exempt from capital taxation-inheritance tax, capital gains tax and corporation tax on companies' gains. Broadly, Schedule 3 includes all national museums, those under local authority or university control, the National Trusts, the Art Fund, the Friends of the National Libraries and, from September 2016, those museums and galleries that had been maintained by a local authority or university but are now independent charitable trusts.

This was introduced in the 2012 Finance Act and gives a tax incentive to living donors (individuals and companies who are liable to UK tax) to donate important cultural objects to the nation. In return, individual donors receive a tax reduction of 30% of the value of the object and companies receive 20%. This scheme is primarily philanthropic and was introduced as part of the Government's wider emphasis on encouraging philanthropy in the cultural sector.  It does not extend to land and buildings - there are other reliefs for lifetime gifts of those.

There may be occasion when an owner would prefer to make an outright gift of an important object to a charity but has concerns about its long-term preservation. In such cases it is important that the gift is made subject to binding conditions.

These might arise in connection with negotiated sales or gifts particularly where the owner has dual citizenship.

There are a number of reliefs and exemptions available for chattels such as the exemption from Capital Gains Tax for any chattel sold for £6,000 or less and Business Property Relief from Inheritance Tax which may be available where chattels have been used in a business, or following a working author’s or artist’s death.

This is a deferral of capital gains tax or inheritance tax for objects of outstanding national or local importance or those closely associated with outstanding buildings; and for outstanding land and buildings. The deferral is granted subject to conditions as to public access, maintenance, preservation and retention being met. The conditions and qualifications require complex negotiation. We can also assist in analysing any historic exemptions (including from Estate Duty) that may remain in place particularly where exemptions may need to be renewed.

Both in the context of lifetime dispositions or on death, we can set out the options available to help you and your professional advisers to formulate a strategy that is right for you and your family.

We have an in-depth knowledge of UK collections and can advise on potential public venues.

We can provide calculations of an estimated tax liability that may arise on a sale. In conjunction with the appropriate specialist valuers we can provide other valuations for tax planning purposes and retrospective valuations and assist with negotiations with HMRC on these, if they are challenged.

All cultural objects manufactured or produced more than 50 years before their exportation require an export licence. If their values are equal to or above certain thresholds, they require individual licences. We can assist with the applications and how to present these.

Under what is called the “50 year policy” those items that have been in the UK for the 50 years before exportation, are assessed against the “Waverley” criteria for national importance. If their export is objected to, they are referred to the Reviewing Committee on the Export of Works of Art (RCEWA). The RCEWA advises the Minister whether they are national treasures and, if so, whether their export should be deferred to provide time for a museum, gallery, library or individual to match the price and keep them in the UK. We can assist with this process and provide representation at the meeting.

This is an alternative to commercial insurance for UK museums borrowing objects for exhibition or study where the UK Government underwrites the risk of loss of, or damage to, the loans. The scheme is of fundamental importance in enabling public access to a wide range of high-quality loans. We can advise on the documentation and on claims.

These reliefs are available for importing chattels into the UK without having to pay the import VAT on them.

Where charities agree to return objects from their collection there may be tax consequences.