Select Committee on Culture, Media and Sport Written Evidence

Memorandum submitted by the Goodison Review Group

  I have the privilege to act as Chairman of a small group of lawyers and museum curators who have come together in support of regional and national collections to help them preserve and acquire works of art and culture of significance and to look at ways of making such items available to the public. A list of the members of the group is attached.

  I am today sending you by e-mail an introductory memorandum together with four papers produced by the group—The Future of Conditional Exemption for Heritage Chattels, Possible Modifications to Administrative Practice relating to negotiated sales of Objects to Institutions, Proposals for UK Tax Relief on Donations of Cultural Property, and a paper summarising the Austrialian Cultural Gifts Programme (not printed here).


  The Group, a voluntary group of specialists, made up of legal advisers, curators of public collections, and others, was formed in 2004 following the Goodison Review to consider the recommendations and to research and refine them so far as desirable and to put the recommendations as so refined to the Treasury. The overriding objective is to suggest ways in which objects and works of art of importance to the national heritage can best be preserved and retained in this country.


  1.  These papers are submitted in the context of the fifth and sixth issues in respect of which the Committee has indicated that it is particularly interested in receiving evidence: funding, and the maintenance of the nation's heritage via official, charitable and other organisations.

  In this field longstanding Government policy has two basic objectives:

    (i)  To encourage the retention of such chattels in private ownership in this country.

  This has been confirmed recently in the following terms:

    "Successive governments have taken the view that, amongst other things, chattels of national, artistic, historic or scientific interest form an integral and major part of the cultural life of this country. Their view has been that this national heritage should be conserved and protected for the benefit of the nation as a whole.

    Their view has been that, so far as possible, property of this kind should remain in private ownership and that those owners should be encouraged to retain and care for the property and display it to the public."[30]

    (ii)  To provide incentives to a disposing owner to do so in favour of a public . . . museum.

  Policy in this respect has been stated as follows:

    ". . . where this [retention in private ownership] is no longer possible the owners should be encouraged to dispose of it to those bodies in this country which have been set up specifically to hold such property in trust for the community."[31]

  2.  In the past the relief accorded by conditional exemption from capital taxation on death and otherwise has been seen as a prime means of meeting the first objective, with acceptance in lieu of tax and the private treaty sale dispensation fulfilling a similar role in meeting the second. The existing reliefs are founded in the distant past[32]. They are in need of wholesale reappraisal if they are to play any significant role in contemporary conditions in stemming the outflow of heritage chattels from this country. This is against a background of a dearth of funding from central government towards the acquisition of such works of art by museums, and a reduction of Lottery support towards such acquisitions[33].

  3.  The rundown of Lottery support is likely to be exacerbated in the continuing erosion of the principle of additionality recently noted by the Committee[34]. It will certainly flow from the already announced divesting from the Heritage Lottery Fund and other "good causes" over the period 2009-12 of an estimated £410 million as part of the review of current Lottery licences[35], and the establishment of the new Olympic Lottery Game, designed to raise a further £750 million for the Olympics, thereby inevitably substantially reducing the likely receipts from the existing Lottery games upon which the HLF is reliant for its income.[36]


  (This paper was submitted to the Chief Secretary to the Treasury on 6 October 2005, but no substantive response has been received from the Treasury in regard to its contents.)

  1.  It will be seen from the Appendix to the Paper that a survey carried out by the Group in the Summer of 2005 among solicitors known to advise owners of heritage chattels, shows that following the changes made to conditional exemption under Finance Act 1998, the vast majority of those surveyed retain no enthusiasm for the present exemption regime. This is in sharp contrast to their perceptions of the previous exemption dispensation. Such evidence would seem to demonstrate that in its present form, conditional exemption is unlikely to provide a meaningful alternative following a new death or other taxable event to the disposal of heritage chattels in the open market, and the likelihood that many such items will be exported following sale.

  2.  The paper underlines (see Part 1, paragraph 2) that such concerns arise not only in regard to existing historic collections, but also in regard to new and emerging collections. It emphasises (see Part 1, paragraph 5.3) the strongly held perception of the Group that in its insistence on the qualitative criteria of "pre-eminence" the current dispensation is elitist, in conflict with 21 Century requirements of diversity, and the need to have regard to the opinion of stakeholders. Finally (see Part 1, paragraph 5.4) it records the view of the Group that current arrangements for ensuring public access to exempt chattels are unrealistic and against the national interest.

  3.  In its recommendations the Group puts forward (Part II, para 2) modern qualitative criteria for exemption, with new proposals to give "open access" (Part II, para 3), and "virtual access" (Part II, para 4) to the public to exempted items. Revised arrangements of the kind proposed are seen as likely to provide both the public at large and cognoscenti with a better opportunity to appreciate and inspect exempt chattels than under current arrangements. At the same time it is thought that the proposals would allay the understandable concerns of owners and their advisers in regard to the current public access regime, thereby securing renewed confidence in conditional exemption and with this, reinstatement of the arrangement as a real defence against the dispersal abroad of heritage chattels following a death or other taxable event.


  (Papers B1 and B2 were submitted to the Permanent Secretary to the Treasury on 22 October 2004. Paper B3 was submitted to the Permanent Secretary on 19 November 2004. No substantive response to the papers has been received.)

  1.  The existing direct taxation incentives for acceptance in lieu of tax and private treaty sale are administered by HMRC Capital Taxes. The relevant legislation offers a bare framework for the operation of these dispensations, and much is left to the exercise of discretion by Capital Taxes. Treasury instructions to HMRC appear to be to exercise such discretions in a manner calculated to restrict the scope for completed transactions.

  2.  The Group's paper B1 was prepared to draw attention to areas where a "loosening up" of administrative discretion would increase the flow of acceptance in lieu and of private treaty sale transactions in regard to heritage chattels. To take one fairly graphic example (see paragraph D2 of the paper): it is impossible for a "stranger" to offer his heritage chattel in satisfaction of someone else's capital taxation debt. For example, if one of the executors of a will, having no interest in the estate as a beneficiary, is prepared to offer in satisfaction of the tax debt of the estate, his personally owned Rembrandt painting long coveted by the National Gallery, Capital Taxes will not admit such an offer to be competent. On the face of it, given that the concluded acceptance in lieu of the painting would both settle the tax debt of the estate and at the same time secure the Rembrandt for the National Gallery, such an attitude seems incomprehensible.

  3.  The current acceptance in lieu dispensation only enables inheritance tax or estate duty debts to be settled by cession of heritage chattels to the nation. Paper B2 makes detailed recommendations for the extension of such a facility to settle capital gains tax, income tax and corporation tax debts. Arrangements of this kind exist in a number of countries, notably Australia, France and the United States. The Australian arrangements (for details see Paper B3) have operated successfully for more than 25 years, and these and the existing UK "gift aid" and related reliefs[37] are seen by the Group as the basis of a system enabling capital gains tax, income tax and corporation tax debts to be settled by cession of heritage chattels to the nation. The desirability of extending "offer in lieu" in this way into the realms of capital gains tax, income tax and corporation tax, in the light of the difficulties faced by public museums in obtaining funding to make acquisitions, is but one facet of the proposal. Another is simple logic. Since its introduction in regard to cash gifts, "gift aid" has been expanded to embrace transfers of quoted securities[38], land[39] and certain gifts in kind[40]. Thus no great quantum leap would seem to be required to embrace its extension in the tax code to transfers of heritage chattels to public institutions.


  1.  The concerns of the Group are highlighted by the evidence of the continuing outflow of major heritage chattels from this country contained in the most recent Report of the Reviewing Committee on the Export of Works of Art. This records that over the year 2004-05 of the items before the Committee 65% in terms of value (£30.2 millions worth) were exported, and only 12% (£5.6 millions worth) were "saved" by purchase by a UK based public institution or private individual.[41]

  2.  The Treasury response to the Goodison Review[42] in the area of direct taxation as explored by Sir Nicholas and fleshed out in the Group's papers has either been wholly negative[43] or deafening in its silence.[44] Given existing and anticipated difficulties for public museums in securing funding for the acquisition of heritage chattels, the case for the urgent reappraisal of existing direct taxation incentives designed to facilitate the retention of such chattels in this country would seem overwhelming.

  3.  None of the measures outlined in the attached papers call for direct funding.

18 January 2006

30   HMRC Inheritance Tax Manual paragraph 21048 under the head "Conditional Exemption". Back

31   Capital Taxation and the National Heritage Board of Inland Revenue, December 1986, page 1 at paragraph 1.1. Back

32   Conditional exemption from tax for chattels was first introduced by Finance Act 1896 s20, acceptance in lieu of tax of chattels by Finance Act 1953 s30, with the private treaty sale dispensation first appearing in Finance Act 1921 s44. Back

33   National Art Collections Fund paper The Acquisitions Problem July 2005, reports that the income of the HLF has declined by some 41% since 1997, and that in 2004-05 only 0.46% of HLF expenditure went towards supporting museum acquisitions. Back

34   See the Committee's Report Reform of the National Lottery 5th Report of Session 2003-04, HC 196-1, 25 March 2004, Vol 1, paragraphs 157-165 at pages 53-54. Back

35   Ibid Vol 1, paragraph 132, and HLF The London Olympics 28 July 2005 Back

36   Ibid Vol 1, paragraphs 131-2 and 137. Back

37   "Gift aid" was introduced by Finance Act 1990 ss25-26. Back

38   For "share aid" see Income and Corporation Tax Act 1988 ("ICTA") s587B, introduced by Finance Act 2000 s43. Back

39   For "land aid" see ibid. Back

40   For the relief for equipment given to educational establishments see ICTA s84, introduced by Finance Act 1991 s68 and for gifts of trading stock and assets see ICTA s83A introduced by Finance Act 1999 s55. Back

41   Reviewing Committee Report for 2004-05, pages 2-4. The remaining 22% in terms of value (£10.4 millions worth) were retained in the UK for the present, simply because the would be exporters withdrew their applications for a licence. Back

42   A report to the Treasury, Securing the Best for our Museums: Private Giving and Government Support, January 2004. Back

43   See Government response to the Culture, Media & Sport Select Committee, A Report on the Market for Art, HC414, Session 2004-05 CM6643 July 2005, page 4. Back

44   The sole direct taxation "change" arising from the Goodison Review (See Recommendation 39) is the publication of a new page in its Business Income Manual by HMRC giving guidance on the treatment of the costs of maintaining and facilitating public access to a business archive in computing taxable profits. (See BIM 42501-Specific deductions: administration: business archives). This does little more than confirm the uncertainties of the law in this area. Back

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