The estate of Margaret Thatcher was in the news once again this week, not in relation to her politics, but the location of her wardrobe and most importantly, her handbags! The Victoria and Albert Museum has signalled that it might be willing to accept a collection of clothing owned by Margaret Thatcher, and in turn, saving them from being auctioned off to foreign buyers. It having been earlier reported that the V&A had turned down the opportunity, apparently citing that it only collected items of “outstanding aesthetic or technical quality”. The V&A has denied these reports. Whilst the final decision for the next resting place of Lady Thatcher’s handbags is still to be made, a decision was firmly made in relation to her personal papers.
Earlier this year, Lady Thatcher’s personal papers, including a previously unpublished 17,000 word private memoir of the Falklands War written in 1983, were accepted as a donation to the UK, saving the family over £1million of inheritance tax under the art in lieu of inheritance tax scheme. The papers will firmly stay on British soil for the public’s use and enjoyment, despite a lucrative offer from a US bidder. A win for the nation!
This follows the trend set by one of her predecessors earlier this year when a major collection of Sir Winston Churchill’s paintings valued just under £1million were accepted under the scheme for public benefit following the death of his last surviving child, Lady Mary Soames.
The scheme, which has been around since 1910, offers executors a cost effective way of settling inheritance tax and highlights the importance that the UK government places on retaining its artistic heritage for the nation to enjoy. Over the last decade, £167 million of tax has been forgone in exchange for artistic works which met the ‘pre-eminence’ criteria.
The range of works gifted under the scheme has included historic boats, jewellery, musical instruments, land and buildings. In return, executors receive a credit against the inheritance bill on a deceased’s estate. Not only are the potential tax savings beneficial for families, but the scheme is now viewed as the single most important means of ensuring that beautiful and historically important British articles remain in this country and enter public collections across the UK.
Rather see the benefit with your own eyes?
The Cultural Gifts Scheme, which has been around since 2013, enables UK taxpayers (individuals and corporations but not trustees) to donate important works of art and other heritage objects to be held for the benefit of the public or the nation. If the items meet the pre-eminent criteria, donors will receive a tax reduction based on a set percentage of the agreed value of the object they are donating and will be able to see their objects placed in appropriate institutions such as museums (a preference of institution can be intimated but is not guaranteed) during their lifetime to be held in perpetuity for the public to enjoy.
The tax saving for individuals is fixed at 30% which can be set against their income tax and/or capital gains tax liabilities and can be spread over five consecutive years beginning with the year in which the gift is registered. For corporations, the rate is 20% which can be set against their corporation tax in the year in which the gift is registered only.
Thanks to the introduction of this Scheme, some of the original manuscripts of the lyrics to The Beatles hit songs including ‘Strawberry Fields Forever’, handwritten by John Lennon, are now part of the British Library’s collection.
Prefer to keep it in the family?
The art in lieu of tax schemes, whilst allowing for tax savings during lifetime or on death, it does mean that private ownership of art and heritage assets must be given up in favour of the nation. This may not suit all owners, particularly those who wish to keep assets within the family without having to offer public access/ownership.
A tax liability should not be the prime consideration when structuring the future ownership of art and heritage assets, but it should not be overlooked either. Where this has happened, many families have unfortunately been forced to part with inherited works as they were unable to meet the tax payment triggered by succession. To keep these assets within a family there are several options to consider which can be in effected in life or on death. It is a question of putting in place a strategy that best matches your circumstances and intentions for these assets.
What is clear, is that a little thought and advice now could save you a lot of tax in the future. It is crucial to explore these issues at the earliest opportunity and Brodies can assist you to ensure your art and heritage ends up in the right public or private hands, whether in life or upon death, with the maximum tax benefits achieved for all involved.
If you would like to find out more about arts & culture, we are hosting seminars on this topic in Edinburgh, Aberdeen and Glasgow later this month. For further details and to sign up, please click on the following links:-
If you would like to discuss any of the legal issues arising here and find out more about arts and culture, please get in touch with your usual Brodies contact or any of the following:-
Alan Barr- 0131 656 0103 or firstname.lastname@example.org
Susanne Beveridge- 0131 656 0218 or email@example.com
Alan Eccles- 0141 245 6255 or firstname.lastname@example.org
Norman Kennedy- 0141 245 6265 or email@example.com
Mark Stewart- 01224 392 282 or firstname.lastname@example.org
On November 6, 2015