§ The Paymaster General (Dawn Primarolo)The Inland Revenue's Extra Statutory Concession F7 allows exemption from inheritance tax for works of art when they are only chargeable under strict law because they have been brought temporarily to the United Kingdom for cleaning or restoration, or for loan to an exhibition. That reflects a longstanding judgement that the public interest would not be served if foreign owners of works of art were unwilling to send them to the United Kingdom for these purposes for fear of a potential inheritance tax charge.
Similar disincentives can arise, outside the terms of the existing Concession, when foreign-owned works of art are kept in the United Kingdom for these reasons when they would otherwise have been taken elsewhere. That could occur, for example, where a work is already in the United Kingdom when it is first acquired by a foreign buyer, and the new owner allows a period of loan to a public collection here before taking it to a permanent home abroad.
I have therefore agreed that the Concession should be extended to cover such circumstances.
The revised concession (added words in bold) is as follows: "Where a work of art normally kept overseas becomes liable to inheritance tax on the owner's death solely because it is physically situated in the United Kingdom at the relevant date, the liability will—by concession—be waived if the work was brought into the United Kingdom solely for public exhibition, cleaning or restoration. The liability will similarly be waived if a work of art which would otherwise have left the United Kingdom to be kept overseas is retained in the United Kingdom solely for those purposes. If the work of art is held by a discretionary trust (or is otherwise comprised in settled property in which there is no interest in possession), the charge to tax arising under Section 64 IHTA 1984 will, similarly, be waived."