Painting by Numbers – How Works of Art Pay Tax Bills

The Arts Council announced this month that it has accepted a portrait of the 5th Earl of Carlisle by Joshua Reynolds from the Howard family of Castle Howard, Yorkshire.  The painting is being transferred to the collection of Tate Britain gallery to settle a tax liability for the family.  
Under the Acceptance in Lieu (AIL) scheme, families can donate pre-eminent works of art to the nation and receive a credit for the value of the item against Inheritance tax.  The latest acquisition of the Reynolds painting will settle £4.7m in tax for the Howard family.  

While allocated to Tate Britain, for the time being it will remain where it has hung for the last 200 years in Yorkshire.  Normally art works acquired by the nation are rehung at in a museum or gallery, but where public access is possible in their place of origin, historic ties can be preserved. The Howard family have connections to Cumbria, and AIL is a scheme that has also been used to benefit our local galleries and museums.  For example the latest published report from the Arts Council shows that two works by Frank Auerbach, a friend of Lucien Freud, have been allocated to Abbot Hall Art Gallery in Kendal.  

The county also benefited when the very first boats were accepted under the scheme in 2006 from the late George Pattinson, founder of the Windermere Steam Boat museum.  Included within 11 boats now owned by Lakeland Arts is the TSSY Esperance, which is believed to be the model for Captain Flint’s houseboat in Arthur Ransome’s Swallows and Amazons.  The collection is not currently available for viewing, a shame with a new film due out this month, but will hopefully be on show when the newly redeveloped Windermere Jetty (Museum of Boats, Steam and Stories) opens next year. 

Surprisingly the scheme can also accept land, accepting Mossymere Woods in Norfolk for the National Trust in 2014/15.  It would be interesting to know if this was ever a possibility for the much loved Blencathra when it was put up for sale by the Earl of Lonsdale to settle Inheritance tax in 2014.  The mountain has now been withdrawn from the market and other assets sold instead.  

There is a strict vetting system for items offered in lieu of tax and they must be considered by the AIL panel to be pre-eminent in some way – whether locally, regionally or nationally.  As shown above though the scheme is not limited to art or land, but can include papers, military items, geological specimens and ceramics.  

There is a limit to the value of items that can be accepted to offset Inheritance tax each year as the scheme is a cash cost to the Exchequer.  However, without it, there is a risk that families raising funds to settle Inheritance tax bills could sell items on the open market and then there is a loss not just to the family concerned, but the wider public as well.  


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