Tax relief to encourage gifts of art will not encourage donors, say experts

Simon Weil of Bircham Dyson Bell tells meeting of the European Association for Philanthropy and Giving that the relief is 'better than nothing, but not much'

Works of art
Works of art

A tax relief intended to encourage gifts of "pre-eminent works of art" to the nation is badly designed and will do little to encourage donors, a panel of tax and legal experts told a European Association for Philanthropy and Giving meeting this week.

A Treasury consultation on the rules, which could grant up to 25 per cent relief on income tax or capital gains tax to donors who donate major works of art, will close later this month.

Simon Weil, chair of the EAPG and a partner at law firm Bircham Dyson Bell, told the meeting the scheme had so many flaws and restrictions that it was "better than nothing, but not much better than nothing".

One major problem, he said, was that the scheme allowed gifts to be made only to the government, which would then loan the works to art institutions. These could include not only charities but also bodies such as English Heritage.

He said the rules had been constructed as they had because the government was worried about a clause in the Finance Act 2010 that allows donors in the UK to claim tax relief on gifts made to overseas charities.

"The government doesn’t want to pay tax relief on gifts to the Louvre," said Weil. "But donors really aren’t going to be attracted by the idea of giving something to the government, which may or may not loan it to their chosen charity."

He said the government could easily construct the relief so that the gift would be given to the charity.

Sir Nicholas Goodison, who chaired the review of the arts that first recommended a relief, said another problem was that the government had placed a £20m cap on the value of tax relief that could be offered annually through the scheme. This relief was shared with the acceptance-in-lieu scheme, which allows inheritance tax to be paid using works of art, he said.

Most of the value of this cap is already used up by the AIL scheme, he said. "We need either a separate cap or to raise the cap," he said.

Wendy Philips, head of the tax and heritage department at Sotheby's, the auctioneers, said the 25 per cent rate was less generous than Gift Aid and tax relief on gifts of shares and should be brought in line with them.

"People are saying to us that this doesn’t seem too fair," she said. "I don’t think it’s enough to encourage donations.

"It’s not carried forward or back. A lot of donors won’t have enough tax liability to enjoy this benefit all in a single year."

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