Questions framed over future of tax rules for art gallery deals
EXPERTS have raised questions about the future of beneficial UK-wide tax rules for art galleries in the event of a Yes vote.
A new report published by arts advisers Pall Mall, written by the leading Edinburgh private client law firm Turcan Connell, also warns of the consequences if an independent Scotland does not adopt arrangements such as a government indemnity scheme for the public display of private art, whose loss it says would be “to the detriment of cultural life of the country”.
The report, Art, Tax & the Scottish Referendum, raises questions over the future of UK tax schemes such as the acceptance in lieu rule, which allows valuable works of art to be given to galleries instead of an estate having to pay large inheritance tax bills.
However, the National Galleries of Scotland believe they have a “strong case” to convince the government of an independent nation to maintain special tax powers to protect galleries and museums.
The acceptance in lieu rule has led to several important artefacts entering Scottish museums and galleries. Last year, for example, the National Galleries of Scotland acquired a work by John Constable, Portrait of Laura Moubray, that had belonged to the late artist Lucien Freud. The tax offset by the acceptance of the work was £105,000.
The report by Turcan Connell, which has a strong “private client, wealth management and tax focus”, says galleries and private collectors of art should expect change whatever the result in September.
The report said: “In the event of a Yes vote, the changes will be more obvious but in the event of a No vote, it is looking increasingly likely that there will be increased devolution to Scotland, particularly in relation to taxation and spending powers.”
It discusses the conditional exemption scheme which allows private parties to reach agreements with HM Revenue and Customs over properties, where in exchange for an exemption from inheritance tax, buildings are made accessible to the public.
The report says: “It is, on the face of the matter, possible that, if Scotland were to separate from the United Kingdom, current conditionally exempt items would be forced into breach due to Scotland no longer forming part of the United Kingdom – although it would be hoped that some pragmatic solution could be worked out.
“If that were to be the case, there would be very large tax liabilities for unsuspecting parties. In those circumstances, the parties in question would almost certainly be forced to sell the property in question.”
In its conclusions, however, the report says that for private collectors of art “there seems to be no reason to panic at the moment”.
A statement from the National Galleries of Scotland said: “In the event that Scotland votes to become an independent country then it will be up to any new administration to decide how it wishes to deploy its new powers.
“However, there is a longstanding and very successful record of collaboration between the private and public sector in Scotland with regard to protecting our heritage and providing public access to outstanding works of art.”