The paintings were accepted and will mostly hang at Chartwell, Churchill’s family home, for the nation to continue to enjoy.
The collection, valued at over £9 million, is not a one-off example of paying inheritance tax in this way. Between 2009 and 2014, the Government accepted works of art and other heritage pieces worth £168.8 million in place of tax, including sculptures by Hepworth and Degas and paintings by Stubbs and Rothko.
This means that if you are lucky enough to have a cultural treasure in your family, there may be an opportunity to donate it to the nation to reduce your family’s tax bill.
The Acceptance in Lieu (AIL) scheme to pay inheritance tax
This scheme enables families to pay part (or all) of an inheritance tax, capital transfer tax or estate duty bill by offering a gift of culturally or historically important objects, land or buildings to the Government. The scheme only applies to gifts made in a Will or arising on an intestacy.
The offer will be considered by the Secretary of State for Culture, Media and Sport, who is advised by a panel of experts from Arts Council England. The key test is whether the asset would make a significant or important addition to a national, local or university collection, or whether it has a significant association with a particular building. If accepted, the asset will then be given to a public museum, archive or library.
This scheme does not apply to payments of income tax or capital gains tax.
Cultural Gifts Scheme (CGS) to pay income tax and other lifetime taxes
This scheme applies to assets given during the lifetime of the donor, in exchange for a liability to pay income tax, capital gains tax or corporation tax.
Crucially, only some of the tax can be paid in this way. Individuals can obtain a reduction of up to 30% of the agreed value of the asset from their tax bill, and companies, a reduction of up to 20%. The tax savings can be claimed in the tax year in which the donation is made and in the next four years, which can greatly increase the saving.
The types of items that have been accepted by the two schemes so far are extremely varied, so if you happen to have a Constable painting, a military dress coat dating from the 17th century, a note written by Charles Darwin as a child, a collection of Chelsea porcelain, or handwritten lyrics by John Lennon, you could qualify to take advantage of these schemes.
If you think this could apply to you, our experienced team can advise on the opportunities for tax-saving and how to go about this.
If you would like more information and advice, please contact Michelle Rose on 0117 314 5246.