John Healey: Charities may not have those assets in mind, but the provisions in the hon. Gentleman's amendment cover exactly those assets. That is the problem with the amendments that I am trying to address.
Mr. Flight: I apologise for further interrupting the Economic Secretary before he leaves this territory. The point about tax benefits that relate to works of art is that they do not operate in favour of art galleries. Generous inheritance tax benefits exist for people who keep works of art in their homes, but the cri de coeur of art galleries, which I sought earlier to articulate, is to put works of art in the same category as property and quoted shares. That should stimulate a much bigger flow out of private control into art galleries to the greater benefit of the public at large.
John Healey: Essentially, our concern to secure works of art for the United Kingdom collections and public is dealt with through private treaty arrangements that, in our experience, work perfectly effectively. Such arrangements are used to secure
Column Number: 383works of art that are heritage assets to museums and galleries. There is no capital gains or inheritance tax liability on a private treaty sale, and the terms of the deal include what is called the douceur, so that some of the tax break goes to the vendor. Furthermore, living artists who donate their works to a museum, gallery or any other charity can get income tax relief for the gift through the relief for gifts of trading stock.
The right hon. Member for Fylde (Mr. Jack) asked about gifts and private treaty sales. In private treaty sales, valuation questions generally do not arise, because the value is agreed between the two parties. It is a differently structured process of valuation than would be the case if the scope of the provision were widened by both sets of amendments.
Therefore, it is difficult to see how an income tax relief for gifts of works of art, on top of the existing tax breaks, would have a significant effect in increasing gifts of such assets. The hon. Member for Arundel and South Downs made it clear that he is concerned about works of art not ending up in the national collection. I share the sentiment, but the operation of his amendments may actually work counter to what he is trying to achieve. In some cases, his proposal may work against the interests of the UK's heritage.
The taxpayer's favoured charity would be under the usual obligation to maximise the benefit of the gift in the furtherance of its charitable objectives, so it might have no option but to arrange for the work of art to be auctioned. If a foreign museum bought it, the work would be lost to the UK. By comparison, an aim of the inheritance and capital gains tax reliefs for gifts and private treaty sales to qualifying UK institutions—not just museums and galleries but university libraries, heritage bodies and others—is to keep assets in the UK for the benefit of the public.
The hon. Gentleman rightly anticipated my response to his amendments, although he was not entirely right in anticipating my arguments and concerns. If he returns to the matter in future years, as he promised, perhaps he might examine my comments to determine whether there are good grounds for his concerns.
The generous reliefs that are already in place provide adequate incentive for donors to give assets of a kind that charities can retain or easily liquidate. The reliefs are simple, straightforward and well defined. Therefore, I encourage the hon. Members for Kingston and Surbiton and for Arundel and South Downs to withdraw their amendments. If they are not prepared to do so, I ask my hon. Friends to reject the amendments.
Mr. Flight: I thank the Economic Secretary for his full, well-considered comments and responses. However, our amendments have been discussed and drafted with the help of representatives of the country's main art galleries. Their view is that, although it sounds great, they do not get much from private treaty sales. They believe that the incentive of the gift scheme has the potential to result in many more works of art for the national collection.
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If such measures did not apply only to art galleries and the like, but across the board of charities, which I think would be only fair, I accept that it could result in charities having a large number of works of art to sell, which would then give the galleries a problem in raising the money to purchase them. I think that that is a fair issue of which to take account.
However, notwithstanding the wider practical issues that were touched upon, I do not think that the valuation of major works of art is a major issue. It is already dealt with in different ways. There is an issue of principle, which is where we started. In general, for better or worse, wealth is held predominantly in securities, land and works of art, and if one is going to permit that principle, as in the United States, the arguments for excluding art are somewhat—I will not say contrived—very particular to the territory of works of art. I remain of the view that next year we are likely to be focusing on an extension to works of art when the particular issues to which the Economic Secretary has referred have been thought through. I think that it is quite difficult logically not to go down the US road more fully than we have embarked upon at present.
There is not much point in voting on the issue. The Government have made their stance very clear, and there are some practical issues to address. In begging leave to withdraw, I would make the point that there is a logical inconsistency where we now are, which will need to be addressed. It is better to do that one stage at a time each year, than not to go forward at all. I beg to ask leave to withdraw the amendment.
Mr. Davey: I wish to seek leave to withdraw the amendment.
The Chairman: Order. The hon. Gentleman does not need to withdraw it as it has not been moved.
Mr. Davey: Should the Committee agree to the hon. Gentleman's request to withdraw his amendments, I would not seek to move the amendment on the amendment paper in my name and those of my hon. Friends. I think that the Government are making progress, which should be recognised. As the debate has developed, the case made on the Opposition Benches has been strong, and follows the strong logic of the Government's own position. Although we are not going to vote on the amendments, I would urge the Government to reflect on the debate, and I hope that next year we might have total agreement in the Committee on further, more progressive amendments.
Amendment, by leave, withdrawn.
Mr. Flight: I beg to move amendment No. 98, in page 72, line 23, leave out 'where' and insert 'whether or not'.
Mr. John Burnett (Torridge and West Devon): On a point of order, Mr. Gale. Are we going to have a stand part debate on clause 96?
The Chairman: I will assess that when the time comes, but the time has not yet come.
Mr. Burnett: I beg your pardon.
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Mr. Flight: Amendment No. 98 is designed to extend the relief to land held outside the UK. We cannot see any reason why UK charities should not be able to benefit from non-UK land. It is certainly the sort of matter that is likely to run contrary to European Union principles in the near future. To give a different tax treatment to an asset in one EU state from another may be a problem. Aside from that, what is the logic of excluding non-UK land? The Government seem not to have worried about certain other aspects of their tax legislation dealing with UK assets. We do not envisage any particular valuation problem, because land is an asset that many charities sell if they are given it. What is the difference between land in Kent and land in Calais?
John Healey: I am sure that you would not wish me to be drawn into speculation about the development of the European Union, Mr. Gale. I was interested to hear the case that the hon. Gentleman was looking to put for the amendment, the essence of which seems to be, ''This is a logical extension, so why not?'' The principal reason why not is that extending the relief to property situated anywhere in the world would make it complicated to administer and virtually impossible to police.
Limiting relief to properties in the UK means that a UK charity accepting a gift, which needs a certificate of acceptance, can readily access a property to ensure that it is suitable for its purposes. The certificate is an important protection for charities to prevent unwanted properties from being gifted to them. The Inland Revenue can also, in most cases, easily confirm a donor's interest in a property and agree a valuation for the purposes of the donor's relief.
It is not hard to foresee the problems that would be caused by properties that could be anywhere in the world. If the relief were extended to include non-UK properties, charities would be faced with taking decisions on whether to accept a property with little or no first-hand knowledge of its utility. The Inland Revenue would find it difficult to confirm whether a donor's interest in a property under foreign law met the requirements for the relief, and it could be extremely difficult to agree a value for a property. The relief, as it stands, is relatively simple for donors, charities and the Inland Revenue. Amendment No. 98 would only complicate that, and I urge the Committee to reject it if it is pressed to a vote.
Mr. Jack: I want to probe the Economic Secretary about his remarks. To some extent I can understand his line of argument, but in a world of double tax treaties the internationalisation of tax and other matters that we have discussed, such as valuations, are part and parcel of the issue. If, for example, a children's charity were offered a holiday home in sunnier climes that would enhance its ability to give a good quality holiday to UK children, then, by virtue of the restriction, which the amendment seeks to address, it would be unable to take control to show that that particular property was of worth to it. That would inhibit its ability to be of service to UK children.
The Economic Secretary may have reservations about the amendment moved by my hon. Friend the
Column Number: 386Member for Arundel and South Downs. Nevertheless, if a charity were offered a property or land abroad and said, ''Yes, we think that it would be a useful adjunct to what we are doing,'' and could demonstrate that that relationship clearly fulfilled the point, which my hon. Friend made, that the property or land was not being deposited on it as an ineffective asset, surely in an increasingly mobile world there is a good case to be made for a procedure to allow such a donation to take place. It would not be beyond the wit of man to sanction such useful donations on an exceptional basis.
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