§ Mr. Fauldsasked the Chancellor of the Exchequer whether he will exempt from capital transfer tax and capital gains tax any proceeds of any insurance or Government indemnity claims which arise from the loss of. or damage to, works of art which are on view to the public in houses, national and provincial museums and galleries, or on loan to Government buildings or public exhibitions both in the 203W United Kingdom and abroad, provided that such proceeds are expended on replacements approved by the Standing Commission on museums and galleries.
§ Mr. Peter ReesThe loss of, or damage to, any property does not in general constitute a chargeable transfer for capital transfer tax purposes whether or not insurance moneys or other compensation (such as under the Government's indemnity scheme) are received. It however, the property has previously been the subject of a conditionally exempt transfer from capital transfer tax, one condition of which is that the present owner must take reasonable steps for the property's preservation, any loss or damage may imply a breach of that undertaking. Any material breach of the exemption conditions will give rise to a capital transfer tax charge on the value of the property; otherwise, there is no charge. If at the time of the loss or damage the property was on loan, the owner could be in breach of his undertaking only if he had failed to ensure the borrower would take the necessary steps to ensure preservation, and if the borrower was a public gallery or other institution that is not likely to be the case. The exemption suggested by the hon. Member would not be appropriate. It would benefit only those owners in breach of their undertakings and indeed might weaken the incentive which the tax system provides to look after heritage property.
So far as capital gains tax is concerned, relief is already available. Any liability arising in respect of the receipt of the insurance or other compensation proceeds can generally be deferred until a subsequent disposal if the owner within a certain period applies the proceeds in acquiring replacements, or in restoration, and claims deferment.