When walking around a museum, many of us might wonder how all the objects got there. Some were likely acquired by gentlemen travelers during their Grand Tours of Europe in the 18th century, and eventually donated to the museum. Other pieces were purchased with the institution’s acquisition funds, while some are likely on loan from private collectors who may be considering making a gift of them down the line. However, in the United Kingdom, when looking at a museum’s
, you might also be looking at a collector’s tax relief receipt.
In the fiscal year 2018–19, 46 works of art, collections, and buildings were accepted by the U.K. government in exchange for £58.6 million ($76.3 million) in income and inheritance tax under the rules of two statutory schemes: Acceptance in Lieu
(AiL) and the Cultural Gifts Scheme
. The former is connected to the estates of the deceased, the latter to the collections of the living. Among the pieces taken into public hands from private collections last year were ’s Portrait of Emperor Charles V
(ca. 1603), a pair of ’s
pier tables, and ’s
bronze sculpture Wretched War
Historically, the AiL scheme had not been associated with the public donation of works by contemporary superstar artists and esteemed
. Instead, it was used by the nobility and gentry of the U.K. to escape “death duty” (the old term for inheritance tax) by keeping grand houses and their collections in the U.K. and under public ownership.
The English author Evelyn Waugh, in Basil Seal Rides Again, or The Rake’s Regress (1963), colorfully lamented the decline of the great country houses that had fallen into the hands the National Trust, the public body responsible for looking after donated houses: “You know what [the country house is] like as well as I do. Oh the hell of the National Trust…all the rooms still full rope barriers and Aunt Barbara in the flat over the stables and those ridiculous Sothills in the bachelors’ wing.”
The story details a historical moment when, due to high inheritance duties, many large houses were being donated to the nation to avoid crippling tax bills. Thousands of aristocrats were forced to leave their houses, or reside in closed-off annexes, while their great halls were opened to tourists. This change in circumstances for the upper classes was accelerated by the AiL.
Originally conceived in 1910 by then–Chancellor of the Exchequer David Lloyd George, AiL was designed to allow large estates to offset tax bills when they had highly valuable areas of land or aesthetically important objects.
During the interwar years (1919–39), there was a great deal of concern about the decline of landed estates. The 1937 National Trust Act sped up donations of houses to the public trust, which was charged with keeping historic collections together for public viewing.
Over the past 80 years, the AiL scheme has come to be dominated by donations of art, not houses. As the U.K. government’s 2009–10 Acceptance in Lieu Report states, this is because of “more effective tax planning by landed families and…the reduction of the rates of Death Duties from 75 per cent in 1975 to 60 per cent in 1984 and 40 per cent in 1988.”
The report goes on to say that, “as a result of the rise in the value of important works of art, the offer of a single major painting or piece of furniture can satisfy a large tax liability. Very few estates today incur a tax liability so large that it can only be settled by the offer of a
or a Picasso.”
With the addition of the Cultural Gifts Scheme in 2013, which allows collectors to give during their lifetimes, and the allocation of £40 million ($66 million) in tax that can be written off annually to the two programs in 2014, donation has become a major source of financial relief for collectors and a public benefit for institutions and galleries.
The two schemes are reasonably unique within the art world, though the United States does have mechanisms for the donation of art, as Beth Smith, an executive director at Morgan Stanley, described
in an article last year: “In order to obtain a charitable contribution deduction equal to the fair market value of a work of art, the work must be donated to a public charity or private operating foundation, and the donor must anticipate that the charity’s use of a work will be ‘related’ to its exempt purpose.”
Suzanne Marriott, a partner at the law firm Charles Russel Speechlys and an expert in art law and inheritance claims, told Artsy about the benefits of the two British schemes for collectors with large tax bills. “For gifts on death, the donor’s estate receives an inheritance tax credit if the artwork is accepted under the Acceptance in Lieu scheme,” she said. “The tax credit is calculated in such a way that the donor’s estate retains approximately 17 percent more of the value of the artwork if it is accepted under Acceptance in Lieu than if it were to be sold on the open market and inheritance tax paid in the normal way.”
The payback on donations from living collectors is more flexible. “For lifetime gifts by individuals, the Cultural Gifts Scheme provides a tax credit worth 30 percent of the market value of the donation which can be set against income tax and/or capital gains tax liabilities,” said Marriott.
But she warned potential philanthropic collectors: “Competition to qualify for a share of the relief is fierce and only objects (or collections of objects) which are of pre-eminent national, historic, artistic, or scientific importance are accepted.”
Over the last century, qualifying objects have ranged from the sublime to the prosaic. Compare, for instance, ’s The Virgin and Child with Two Angels
(ca. 1280–85), donated in 2000, to 2018’s donation of the Symons Collection of medical and self-care instruments, which included, according to an Arts Council England report, “glass cups and bleeding bowls, 19th-century stethoscopes, acupuncture needles, an assortment of early thermometers and tongue depressors…and political buttons showing Louis XIV before and after having an enema.”
An artwork’s importance is not the only factor a collector should keep in mind when attempting to donate to the U.K. A spokesman for Arts Council England, the organization in charge of administering the AiL and Cultural Gifts schemes, stressed the importance of provenance when assessing objects for the nation. For instance, gaps in ownership between 1933 and 1948—when the German Nazi Party seized much Jewish property and looted others during World War II—can be a major factor in rejection.
“We emphasize that the nation is as any other purchaser in this respect and we cannot entertain offers where all possible steps have not been taken to investigate the provenance of the objects offered,” the spokesman told Artsy. “Where the ownership history of objects is not documented, it is necessary to make detailed enquiries to ensure that objects which were either looted or sold as a result of duress are not acquired by the government.”
However, the same spokesman was keen to highlight the enormous success of AiL—not just for the donating collector, but for the public as a whole. “[AiL is a] vital mechanism through which exceptional objects enter public collections to be enjoyed by thousands across the country,” he said. “Since [its] launch [AiL has] made a substantial contribution to the cultural life of the nation…ensuring that items of international significance come into public ownership to benefit us all.”