Tax reliefs on art and cultural property – everyone's a winner!


People who collect art and other items of cultural value generally do so for one of two reasons - their own pleasure or to realise its investment value – or sometimes, as a combination of the two.  Still others are fortunate enough to inherit such items, and may aim to pass them down to future generations.

Whatever the reason, most people are keen to take advantage of any tax reliefs that may be available to mitigate or defer tax during their lifetime, or to reduce the tax payable on their estate in future.  Even better, they may be able to do so while also securing valuable pieces of cultural property for the benefit of the public.

Tax-saving schemes for art and cultural property

Over the years, the UK Government has developed a number of tax-saving and deferral schemes for collectors of art and cultural property. All of these schemes enable the public to benefit from access to cultural items that might otherwise be kept privately or sold abroad, in return for some form of tax saving or deferral for the collector or their estate.

The four principal schemes are, as follows:

  • Acceptance in Lieu scheme – reduces or eliminates the inheritance tax payable by an estate;
  • Cultural Gifts scheme – a relief from income tax, CGT and corporation tax to encourage people to make gifts of works of art during their lifetime.
  • Conditional Exemption from IHT – a deferral of tax that would otherwise be due following a taxable event, rather than a complete exemption.
  • Gifts for National Purposes – a relief from CGT and IHT where heritage assets are transferred to a one of a list of specified institutions, e.g. the British Museum, National Gallery etc.


The Acceptance in Lieu (AIL) scheme allows people who are liable to UK inheritance tax (IHT) (including executors of an estate) to apply to settle the tax by offering property in full or part payment of the IHT liability.

The aim of the scheme is to ensure that pre-eminent heritage assets are retained in the UK for the public benefit rather than being sold to private dealers and/or moved out of the country.

To qualify for the scheme, objects or collections must be:

  • of pre-eminent importance on the grounds of their national, scientific, historic or artistic interest.
  • associated with an important historic building in public ownership or belonging to a charity such as the National Trust; or
  • land or buildings that are important to the National Heritage, including buildings of historical and architectural importance, and land of historic or scientific significance, such as a battlefield or Site of Special Scientific Interest.  However, the procedures for this differ from those for objects and are beyond the scope of this article.

How does the scheme work?

Offers in lieu must be checked initially by HMRC to ensure that the basic criteria of the tax scheme are met.  If so, a panel of independent experts, the Acceptance in Lieu (AIL) Panel, determines whether the object is pre-eminent, and of acceptable physical condition, and the value at which it may be accepted.

The Panel's recommendations go to the Department for Culture, Media and Sport (DCMS) (or the appropriate Minister in Scotland and Wales), which determines whether to recommend acceptance of the object to HMRC.

Once accepted, objects or collections are allocated to a public institution or charity, for example, the National Trust.            

What are the advantages for the property owner?

If property is accepted in lieu of tax, the agreed value, being the open market value (net of CGT and IHT) that would have been payable if the property had been sold) is deducted from the estate's IHT liability, and no IHT is payable on the property itself.

In addition, to incentivise PRs, acting on behalf of heirs, to use the scheme rather than sell on the open market, a "douceur" is also offered.  For land and buildings, this is 10% of the potential tax liability of the property, and for valuable objects, it is 25%.  This is added to the net value of the property set against the tax liability of the estate.

As an example:

  • Mrs A's art collection has an open market value of £20 million and a potential tax liability of £8 million. 
  • The collection is accepted onto the AIL scheme.
  • The property's value, net of tax, is £12 million.  A douceur of 25% of the IHT liability (£2 million) is added to the net value.
  • The collection is accepted in lieu of £14 million of IHT that would otherwise be payable on the other assets in Mrs A's estate.

 In the event that a piece of property is valued at more than the IHT payable on the estate, HMRC cannot give change.  However, it may be possible for an institution to pay the difference if this is agreed beforehand with the institution.  This is known as a "hybrid offer"

What are the advantages for the museum or other institution and the public?

The main advantage of the AIL scheme for charities and institutions is to receive valuable pieces of art and cultural property at no, or a lower than market value, cost to themselves.  The public benefits because art works held in private hands are made available to view, and are not sold out of the UK, as might otherwise be the case.

As David Lammy said in the House of Commons in 2006 '…acceptance in lieu is in nearly every way the holy grail of public policy. Absolutely everybody is a winner under the scheme.'


The Cultural Gifts Scheme (CGS), also known as "Gifts to the Nation", enables UK taxpayers to donate pre-eminent works of art and other cultural objects for the benefit of the public in return for a reduction of income tax or CGT for individuals, or corporation tax for companies, proportionate to the value of the gift made.

The decision as to pre-eminence is made by the AIL panel and based on the same criteria as for the AIL Scheme.  The overall process is similar, but acceptance will depend on the annual budget available for both schemes.

Eligible tax savings

For individuals the maximum value of the tax reduction available is 30% of the agreed value of the object, which may be spread across a maximum of five tax years starting with that in which the offer is registered by the Arts Council.

Subject to certain rules and exceptions, the donor will not be liable to IHT or CGT on the gift itself.

For companies, the limit is 20% of the agreed value and the corporation tax liability may only be offset in the accounting period in which the offer is registered.

Non-tax benefits to the donor

Individual owners will see their valuable objects and collections placed in institutions for the benefit of the public during their lifetime.  The property will be maintained in good condition and will be available to the public, generally, for a minimum of 100 days per year.  Donated objects may not be sold without the prior consent of the relevant Minister.

Benefits for the museum, gallery or library

Institutions will receive a valuable object or collection at no cost.  These may include objects on long-term loan to the institution or objects of local interest.  Property is secured for the nation that might otherwise have been sold abroad.


This scheme allows relief from IHT on a conditional basis following a taxable event, for example, the death of the owner, or a gift.  Relief is offered in exchange for the provision of undertakings to preserve the property, to allow reasonable public access and publicise arrangements for such access, and, in the case of works of art and other objects, to keep it in the UK unless otherwise approved by HMRC.

If the item is sold, or any undertaking is breached, the conditional exemption is withdrawn and a charge to tax arises.  This will also occur on the death of the person then treated as beneficially entitled to the property.

To be eligible for the conditional exemption, the property must be:

  • a building, estate or parkland of outstanding historical or architectural interest;
  • land of outstanding natural beauty and spectacular views;
  • land of outstanding scientific interest, including special areas for the conservation of wildlife, plants and trees; or
  • an object with national scientific, historic or artistic interest, either in its own right, or due to a connection with historical buildings.

HMRC determines whether an asset qualifies for exemption on the advice of the government's heritage advisory agencies.

During the recent COVID restrictions, concessions were made in relation to the requirements for access to land or works of art, so that owners' inability to provide access did not give rise to a breach of an undertaking, and resultant tax charge.  As restrictions were eased, these concessions were withdrawn, and normal access arrangements now apply. 


An exemption from CGT and IHT is also available for gifts of heritage assets to certain institutions. These include the British Museum, the National Trust and the National Gallery, as well as the Ulster Museum, National Museums of Scotland and of Wales.  However, there are many other institutions on the list, which have also been approved by the Treasury. 

There is no value limit for the exemption and it applies to transfers made during lifetime and on death. One advantage of this exemption over the other heritage property reliefs is that it is not necessary to prove the pre-eminence of the item.

As with all the exemptions discussed, the benefit of this exemption will be to make the property available for the benefit of the public.


The conditions and rules for the reliefs summarised above are potentially complex, and may have implications for how and where heritage property may be enjoyed by its owner.  Consideration should always be given to security, both of the work of art or other item, and the location in which it is kept, especially if this is a residential address.

If you have any queries with regard to any of the heritage property schemes discussed, or in relation to works of art or cultural property generally, please get in touch with a member of our Private Wealth team, or your usual Howard Kennedy contact.

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