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Ever wondered what happens next to those lucky souls who stumble upon a dusty heirloom in the attic, only to find out it’s a priceless medieval artefact?
Maybe they sell it, get hit with a nasty Capital Gains Tax of up to 28% of the profit made from the original cost, or perhaps bequeath it to a family member and get brutalised by 40% Inheritance Tax.
Hidden away in the murkier corners of tax legislation is a little-known law called the Acceptance in Lieu scheme, which incentivises owners of cultural or historic pieces to preserve and protect them in the UK for the benefit of the nation – in exchange for a hefty discount on their tax bill.
Since the Acceptance in Lieu scheme’s inception around £138 million has been offset through the exchange of items including a series of Charles Darwin’s handwritten notes, and original lyrics by John Lennon.
The items accepted under the scheme become property of the state, and are housed in galleries and museums once accepted. The Acceptance in Lieu scheme’s popularity is growing, too. The 2013 report showed the value of items collected hit a record £49.4 million.
A sibling of the Acceptance in Lieu scheme, known as the conditional exemptions rule, can also alleviate Inheritance and Capital Gains Tax, but crucially participants – rather than totally giving their artefacts over to the state – agree to allow public viewings of their items for a certain numbers of days per year.
Since this scheme began over a century ago nearly £1.1 billion has been offset, with an approximated £30 million a year in Inheritance Tax receiving exemption. In total, items currently worth around £225 million are registered through the scheme.
The problem with the conditional exemptions rule is that the law appears to be totally unenforced – so the owners of these cultural antiquities reap all the financial rewards, but can effectively forego their end of the bargain and often ignore requests to view the items.
HMRC keeps a database of the 115,000 items registered under the scheme available for public viewing, however a recent Guardian investigation found that many owners do not respond to requests for viewings – the investigators managed to arrange just five viewings after contacting thirty participants.
These exemptions extend to property as well. Providing you can meet the criteria, your country estate could be Inheritance Tax free – some cases may even qualify for help with the maintenance costs! Sure enough, none other than Highclere Castle – otherwise known as Downton Abbey – appears in the conditional exemption database.
So next time you see a distant relative of a renaissance artist refusing to part with a painting of a fruit bowl, or a wealthy landowner opening their estate up for one Tuesday in October, remember – it’s probably helping them reduce their tax bill.
Over the last few months of 2017 and the whole of January, client managers are busy reminding people of upcoming deadlines and things they’ll need to do to make it easy for them to keep on top of their Self Assessments.