From April 2012 the donors of pre-eminent works of art will achieve significant lifetime tax savings.
The new scheme allows the potential donor to offer to give a pre-eminent object to the nation at a self-assessed value. If the donation proceeds, the donor achieves a tax reduction as a fixed percentage (30%) of the object's agreed value which will be set off against the income tax and capital gains tax payable under the individual's self-assessment. Donations can also come from companies, for which the fixed percentage corporation tax reduction is 20%. The scheme is not available to trustees.
An individual may apply the tax reduction against the tax liability of the year the gift is registered or any of the succeeding four tax years. The tax benefit can be allocated across years in whatever amounts they wish. The gift itself is free of IHT.
Objects or collections may be pre-eminent if they have an especially close association with our history and national life; are of special artistic or art-historical interest; are of special importance for the study of a particular form of art, learning or history; or have an especially close association with a particular historic setting.
The existing acceptance in lieu (AIL) panel of experts will make the first assessment of gifts and valuations. It will agree values and decide where the objects should be located. The donor will make an absolute gift of the object to the nation and the panel will lend it to an appropriate establishment in the UK that is open to the public. That establishment will be responsible for ensuring the object remains in good condition, is available to the public and is fully protected.
The annual fund will be £30m in total for both the AIL and pre-eminent objects regimes – an increase of £10m over the current budget. It has been concluded that acceptance of offers will be on a first come, first served basis in the year. Any interested taxpayer should plan for making an application at the very start of the tax year to maximise their chance of acceptance.
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