ACCEPTANCE OF PROPERTY IN SATISFACTION OF TAX (Hansard, 13 July 1976)

§ Mr. Denzil Davies
I beg to move, That the clause be read a Second time.
This new clause adds the words "works of art" to the categories of heritage property which the Board of Inland Revenue can accept in satisfaction of capital transfer tax provided that the Treasury is satisfied that the property is of pre-eminent quality. It also adds "artistic" interest to the list of criteria for the Treasury to take into account.
This clause, together with New Clause 20, implements the Chief Secretary's undertaking in Committee to meet the substance of New Clause 80 which was moved by the hon. Member for Bristol, West (Mr. Cooke), as reported at cols. 1790–91. This is not a major new clause. It deals to some extent with a drafting anomaly. I recommend it to the House.

§ Mr. Peter Hordern (Horsham and Crawley)
I refer the Minister to an undertaking given by the Chief Secretary 435 in a similar debate on 5th March 1975. The debate concerned objects of art and pictures held not by individuals but by discretionary trusts. I assumed that this position was dealt with in Clause 76 of the Bill. However, I am informed that that is not the case. Under this clause, objects of art and pictures which are held by discretionary trusts are not exempt from capital transfer tax. I cannot believe that that is the case, because the nature of the undertaking given by the Chief Secretary last year was absolutely clear. If the Minister of State would like to reassure me on that point, I shall be happy not to proceed with my remarks.
In his remarks last year, the Chief Secretary said: However, I promise the hon. Gentleman"— that was me— and the House that we intend to meet the point in a future Bill."—[Official Report, 5th March 1975; Vol. 887, c. 1553.] I thought that that point had been properly covered in Clause 76 of the Bill. It may be that I am misinformed about that. However, the nature of the undertaking was absolutely clear. I hope that the Minister of State will reassure me that the position regarding objects of art and pictures held in discretionary trusts is fully covered and that they are exempt, as are other objects of art held by individuals, from capital transfer tax.

§ Mr. Cronin
I appreciate that last year we devoted considerable discussion to this principle. However, I should like my hon. Friend the Minister to say what steps are normally taken to value works of art. I am not clear how the amount of tax is offset against a work of art. There is an imperfect market for paintings, works of art and scientific objects. It seems that there may be wide variations in what these items cost. I remember reading in a newspaper recently that the Tate Gallery bought what appeared to be a load of old bricks for a large sum of money. It seems to me that if a load of bricks was given to the Treasury in satisfaction of a debt, the Tate might not find that entirely satisfactory. On the other hand, the Treasury's advisers might say that the load of bricks was a work of art and worth a lot of money.
There are all kinds of anomalies. There is a wide variation between the 436 sale-room price of a work of art and the price which a dealer would charge for it. Dealers in pictures and works of art tend to think in terms of a mark-up of about 100 per cent. It is not clear how the Treasury would arrive at the right figure in view of those variations.
Will my hon. Friend say what is the present policy of the Treasury on the disposal of works of art, once acquired? In what way are the works of art used for the national interest, and what are the financial arrangements for their disposal?

§ Mr. Robert Cooke
There is no need for me to speak now as I see that the Minister is about to reply.

§ Mr. Denzil Davies
I shall deal with the points which have been raised, although they are not entirely germane to the new clause.
The hon. Member for Horsham and Crawley (Mr. Hordern) raised a point about the undertaking which was given last year by my right hon. Friend. He will recognise that that has nothing to do with the new clause. Not having studied the undertaking, I am not in a position to go further into the matter. It may be relevant, it may not. I am not in a position to expound on that undertaking, if such undertaking was given. However, I shall look into the point and give the hon. Gentleman my reply as soon as possible. I hope that that will satisfy him at least to some extent.
My hon. Friend the Member for Loughborough (Mr. Cronin) raised two general points. They concerned the costs of valuation and how the Treasury valued these works of art. The Treasury employs expert valuers, depending on the nature of the item. The valuers are skilled. No doubt they take all factors into account. They value the works on the basis of open-market value. The Treasury is extremely conservative and would not accept a load of old bricks. My right hon. Friend the Chief Secretary would not allow me to do that even if I wanted to.
I do not have the answer to the question about the disposal of works of art. I shall give my hon. Friend an answer later. The matter goes slightly wider than the new clause.

§ Mr. Robert Cooke
I thought that the Minister dealt with the points most 437 eloquently. However, a certain substance was lacking in what he said. If I speak slowly, he may be able to study a piece of paper which has been given to him and give us the benefit of his study of the matter.
On 5th March 1975 the Chief Secretary, in reply to my hon. Friend the Member for Horsham and Crawley (Mr. Hordern), said: However I promise the hon. Gentleman and the House that we intend to meet the point in a future Bill."—[Official Report, 5th March 1975; Vol. 887, c. 1553.] That must have meant this year's Bill.
I return to the new clause and the point raised by the hon. Member for Loughborough (Mr. Cronin). The point about the Treasury accepting works of art in lieu of tax is that it must make it more attractive to the owner to surrender his work of art in lieu of tax and see it in a public collection. It must be made more attractive for the owner to do that than to sell it on the open market. Otherwise, great numbers of works will be dislodged and bought by people wanting to take them out of the country. In addressing themselves to this point, the Government must realise that if there is a generous provision to make it more attractive for people to surrender their works of art in lieu of tax, the works are more likely to find their way into public collections.
The bricks in the load referred to were not old. They were brand new, though I must confess that they were incomprehensible to me—but they were none the worse for that.