Works of Art on Public Display and VAT (Hansard, 1 July 1982)

§ Lord Boyd-Carpenter
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ Lord Glenarthur
My Lords, the leaflet to which my noble friend refers concerns the VAT treatment of disposals of antiques, works of art and other contents of stately homes. The leaflet is issued for the guidance of those involved in such disposals who are not familiar with the rules on VAT. The guidance set out in the leaflet does not represent any change in the law, or any change in the interpretation of the law on the part of HM Customs and Excise. It does not indicate a new imposition of VAT. It would, therefore, be inappropriate to withdraw the leaflet. However, discussions on the detailed application of the law in this area are continuing.

§ Lord Boyd-Carpenter
My Lords, I thank my noble friend for that Answer. Is he aware that, although the Customs and Excise may maintain that this leaflet does not involve an exposition of any change in the law, in fact VAT has not been levied over many years in this class of case? Is he aware, also, that there has been no statutory change in the law, and some of us are wondering a little why it is that the Customs and Excise, having been quite happy to leave this matter sensibly untouched for many years, should suddenly be taking this initiative?

§ Lord Glenarthur
My Lords, my noble friend is not entirely correct when he says that VAT has not been charged. Certainly, consultations about whether VAT would be applicable in certain cases have taken place. The case arose initially because of an inquiry which concerned the Chatsworth House Trust, and, in fact, the case in point was not liable for VAT.

§ Lord Strabolgi
My Lords, are the Government aware that VAT is waived if an heirloom is sold to a foreign buyer and exported, as there is no VAT on exports? Are they further aware that this does not 324 help to retain works of art of historic importance in this country? Will they look into this and try to do something about it?

§ Lord Glenarthur
My Lords, there is no reason to suppose that the charging of VAT on works of art or antiques in the United Kingdom necessarily encourages exports From the point of veiw of the vendor, he receives the same amount of money whether the work of art is exported or sold to a United Kingdom customer. Although he has to charge tax to the United Kingdom purchaser, this accrues to the Exchequer. From the point of view of the purchaser, if he is a registered taxable person he will be able to reclaim the VAT, anyway. An overseas purchaser will normally have to pay VAT, or some other form of taxation, in the country to which the goods are exported and will generally have to bear greater transport and insurance costs than a United Kingdom customer. It is not, therefore, the case that the overall cost of acquiring a work of art in this country is necessarily lower for an overseas buyer than for a United Kingdom resident.

§ Lord Donaldson of Kingsbridge
My Lords, is the noble Lord aware that I welcome the opportunity— rather a rare one—of agreeing entirely with the noble Lord, Lord Boyd-Carpenter, on this case and hope that the Government will think about it very seriously? All of us who are concerned with the heritage and the arts have begged the Treasury, from all angles, to do things about VAT in different cases, and I hope that the noble Lord will pursue this with his colleagues.

§ Lord Glenarthur
My Lords, I am fully aware of the views that have been expressed in your Lordships' House about the matter. It is something that concerns many people. It is also something that very much concerns the Treasury and they are very much aware of it. To some extent, I think that what I said in my original Answer, that my right honourable friend the Chancellor of the Exchequer is still continuing to discuss these matters, makes the point. I am absolutely certain that he will take very careful note of all the views that have been expressed this afternoon.

§ Baroness Airey of Abingdon
My Lords, may I ask my noble friend the Minister whether VAT is charged specifically on those objects which are on view to the public? Do Her Majesty's Government not feel that this will cause people to hide away their best and most valuable objects and not give the public the benefit of seeing them?

§ Lord Glenarthur
My Lords, it is the case that VAT is chargeable only on works of art which are displayed. There will, of course, be cases in which people who have these works of art want to dispose of them, and there is discussion going on at the moment as to whether or not an appropriate way can be found by which those works of art can be removed from public view for a period of time and then be sold in the normal way, without attracting VAT liability. But, again, I can only tell my noble friend that this is still being reviewed by my right honourable friend the Chancellor of the Exchequer.

§ Lord Harmar-Nicholls
My Lords, can my noble friend say whether or not the Government were aware of this leaflet, before it was issued by the Customs and Excise? My noble friend has given lots of assurances, but if he is not aware that this is a bit of obvious arm twisting by the Customs and Excise, who are being even more rigid in that field, I do not know what else he would want to prove that.

§ Lord Glenarthur
My Lords, the VAT leaflet to which my noble friend refers arose as a result of a specific inquiry about the Chatsworth House Trust, to which I referred just now. It was produced for guidance, because there was clearly a lot of doubt as to whether or not VAT was liable. Whether or not my right honourable friend was aware that the leaflet was about to be produced, I cannot myself say. But I am certain that he was fully aware of the implications of people not knowing what liability to VAT they might have.

§ Viscount Eccles
My Lords, is it not obvious that, if you are in business as the owner of a historic house and are registered for VAT and sell objects through the shop in the historic house, you must pay VAT on them? The only way to get round that is either not to display the objects at all, or to sell them—if you wish to sell them—to the trade or send them to Christie's.

§ Lord Glenarthur
Yes, my Lords. VAT is chargeable on assets to the business, and if a house is open to the public it can be rightly said that a picture is an asset to the business and is VAT-liable.

§ Lord Boyd-Carpenter
My Lords, does my noble friend recall that his answer to the noble Baroness, Lady Airey, that the tax can be avoided by withdrawing the objects in question from public view, will merely mean that many members of the public who would have enjoyed the sight of these lovely things will be deprived of them, as a result of an action by the Customs and Excise which will produce remarkably little revenue in exchange?

§ Lord Glenarthur
My Lords, so far as putting these things away is concerned, it is still a little early to say, because I do not think the rules have been fully examined, but, as I have said, they will be in due course. I do not necessarily think that all works of art will be liable for VAT, because they will probably be passed on to others who are VAT registered and who will be able to claim it back.

§ Lord Davies of Leek
My Lords, can the noble Lord the Minister tell me how much VAT brings in in currency to the country, and is it worth all the trouble that is taken over this?

§ Lord Glenarthur
My Lords, I am afraid that that is another question, which is rather wide of this one.

Lord Saint Oswald
My Lords, whether the leaflet signifies a new departure, or a new interpretation, or merely a new emphasis on the law, do not the Government agree that its results, as raised by my noble friend Lady Airey and reiterated by the noble 326 Lord, Lord Boyd-Carpenter, will have the effect of running counter to the Government's whole policy on the display of art works to as wide a public as possible?

§ Lord Glenarthur
My Lords, it will not necessarily have any effect. There is a principle, which is that VAT—which is a fairly wide tax—is chargeable on business assets. It would be only sensible that assets such as pictures, which attract people to houses which are open to the public, should be liable for the tax in this way.