Acceptance in Lieu
Encyclopedia
Acceptance in Lieu is a provision in British tax law under which Inheritance Tax
debts can be written off in exchange for the acquisition of objects of national importance. It was originally established by Chancellor of the Exchequer David Lloyd George
as a means for the wealthy to pay the increased estate taxes imposed by his People's Budget
of 1909 but had its roots in similar schemes dating to the late 19th century. It has developed from the early years when it was used mainly as a means for the aristocracy to dispose of country estates to the National Trust
to the modern day when it is more associated with the transfer of works of art, antiquities and archive material to museums. The scheme is administered by Arts Council England
, a non-departmental public body
of the Department for Culture, Media and Sport
. The scheme has brought many houses, works of art and other collections into publicly accessible institutions when they would otherwise have gone to auction.
(later known as Estate Duty, Capital Transfer Tax and Inheritance Tax) being levied on the wealthy in the late 19th century many were forced to sell off their large country houses and estates to pay for their tax liabilities. This often resulted in unique family collections of antiques and works of art being lost and dispersed. The 1896 Finance Act
sought to limit the damage by exempting nationally important works of art from taxation and was strengthened by the 1903 establishment of the National Art Collections Fund
which sought to acquire important paintings for the nation. Houses and collections continued to be sold however and David Lloyd George
's People's Budget
of 1909, with its increased land and estate taxes, would have worsened matters. However Lloyd George made a provision in the Finance Act 1910 for the creation of the Acceptance in Lieu scheme to allow land to be given to the nation in lieu of Estate Duty.
The scheme was little used in its early years owing to the disruption of the First World War and the Treasury
's insistence that any shortfall in tax caused by the scheme was made up by reductions in the budget of a government department. The government made it easier for country estates to be given to the nation in the National Trust
Act of 1937 and the Finance Act of 1953, which allowed for the contents of houses to be transferred also. The years after the Second World war saw a large number of houses given to the nation in this manner and brought into the custody of the National Trust. A minor scandal erupted in 1977 when the Treasury refused to accept the late Lord Rosebery
's Mentmore
house in lieu of £2 million of inheritance tax, seeing it instead sold at public auction for £6.25 million and enter private hands. As a result new guidelines for the scheme were introduced by the 1980 National Heritage Act.
Conservative Minister for the Arts
Lord Gowrie
provided a guaranteed allocation of £10 million per year (later increased to the present level of £20 million) from the Treasury reserves to make up the tax revenue shortfall arising from objects received for the nation. Having originally been associated mainly with the acquisition of country estates for the National Trust by the late 20th century the scheme was becoming known more for accepting works of art and archival material for national, regional and local collections. This is due to a decline in inheritance tax levels from 75% in 1975 to 40% by 1988, rising artwork prices and more effective tax arrangements made by the owners of large, historic houses. Since 1984 only one country house has been given to the nation through the Acceptance in lieu scheme, this being Seaton Delaval Hall
which was allocated to the National Trust in 2009. The scheme continues to provide a valuable means of preserving national treasures and has provided objects worth £140 million to public collections in the five years following 2006. Though the National Trust is still a large recipient of assets, receiving more than £21 million worth in 2000–10, objects are allocated to a wide variety of institutions of all levels across the country and there are few major public collections that have not received a donation from the scheme.
Approval of potential cases lies with the Secretary of State for Culture, Media and Sport
or the relevant ministers in the devolved Scottish and Welsh governments (where applicable). The minister is advised on the aquisition of an item by a panel of experts from Arts Council England
in most cases (the Historical Manuscripts Commissioner at The National Archives advises on manuscripts). Until its abolition in October 2011 the Museums, Libraries and Archives Council
provided the advising panel. The panel assesses the open market value of an item and passes this to the minister who makes the final decision whether to accept it or not. The panel aims to provide an assessment of value that is fair to the offerer and the tax-payer.
Once accepted any items currently associated with buildings in public ownership are allowed to remain there, provided public access is available. If they are associated with a private building they may be granted to a public museum but lent back to the house-owner providing public access and security can be maintained. This arrangement allows for unique collections (such as the contents of country estates) to remain intact and not be dispersed or separated from their associated historic buildings. Other items might be allocated by the minister to a museum or gallery at no cost, particularly where the offerer has requested a specific institution be assigned the item. Other items are advertised to museums who are invited to apply for their allocation. In cases where the value of an item exceeds the tax settled the institution receiving the item will pay the difference to the offerer.
Due to certain tax benefits an item offered under the Acceptance in Lieu scheme is worth 17% more to the offerer than if the item was sold at public auction. This makes the scheme a particularly attractive alternative and has been described by the government as "the most important means of acquiring important works of art and cultural objects for public ownership". Some criticism of the scheme has focussed on its failure to provide for settlement of "everyday" taxes such as income tax such as occurs in France, Ireland and Australia.
Inheritance tax
An inheritance tax or estate tax is a levy paid by a person who inherits money or property or a tax on the estate of a person who has died...
debts can be written off in exchange for the acquisition of objects of national importance. It was originally established by Chancellor of the Exchequer David Lloyd George
David Lloyd George
David Lloyd George, 1st Earl Lloyd-George of Dwyfor OM, PC was a British Liberal politician and statesman...
as a means for the wealthy to pay the increased estate taxes imposed by his People's Budget
People's Budget
The 1909 People's Budget was a product of then British Prime Minister H. H. Asquith's Liberal government, introducing many unprecedented taxes on the wealthy and radical social welfare programmes to Britain's political life...
of 1909 but had its roots in similar schemes dating to the late 19th century. It has developed from the early years when it was used mainly as a means for the aristocracy to dispose of country estates to the National Trust
National Trust for Places of Historic Interest or Natural Beauty
The National Trust for Places of Historic Interest or Natural Beauty, usually known as the National Trust, is a conservation organisation in England, Wales and Northern Ireland...
to the modern day when it is more associated with the transfer of works of art, antiquities and archive material to museums. The scheme is administered by Arts Council England
Arts Council England
Arts Council England was formed in 1994 when the Arts Council of Great Britain was divided into three separate bodies for England, Scotland and Wales. It is a non-departmental public body of the Department of Culture, Media and Sport...
, a non-departmental public body
Non-departmental public body
In the United Kingdom, a non-departmental public body —often referred to as a quango—is a classification applied by the Cabinet Office, Treasury, Scottish Government and Northern Ireland Executive to certain types of public bodies...
of the Department for Culture, Media and Sport
Department for Culture, Media and Sport
The Department for Culture, Media and Sport is a department of the United Kingdom government, with responsibility for culture and sport in England, and some aspects of the media throughout the whole UK, such as broadcasting and internet....
. The scheme has brought many houses, works of art and other collections into publicly accessible institutions when they would otherwise have gone to auction.
History
With increasing Death DutyInheritance Tax (United Kingdom)
In the United Kingdom, Inheritance Tax is a transfer tax. It was introduced with effect from 18 March 1986 replacing Capital Transfer Tax.-History:...
(later known as Estate Duty, Capital Transfer Tax and Inheritance Tax) being levied on the wealthy in the late 19th century many were forced to sell off their large country houses and estates to pay for their tax liabilities. This often resulted in unique family collections of antiques and works of art being lost and dispersed. The 1896 Finance Act
Finance Act
In the UK, the Chancellor of the Exchequer delivers an annual Budget speech on Budget Day, outlining changes in spending, as well as tax and duty. The changes to tax and duty are passed as law, and each year form the respective Finance Act...
sought to limit the damage by exempting nationally important works of art from taxation and was strengthened by the 1903 establishment of the National Art Collections Fund
National Art Collections Fund
The Art Fund is an independent membership-based British charity, which raises funds to aid the acquisition of artworks for the nation. It gives grants and acts as a channel for many gifts and bequests, as well as lobbying on behalf of museums and galleries and their users...
which sought to acquire important paintings for the nation. Houses and collections continued to be sold however and David Lloyd George
David Lloyd George
David Lloyd George, 1st Earl Lloyd-George of Dwyfor OM, PC was a British Liberal politician and statesman...
's People's Budget
People's Budget
The 1909 People's Budget was a product of then British Prime Minister H. H. Asquith's Liberal government, introducing many unprecedented taxes on the wealthy and radical social welfare programmes to Britain's political life...
of 1909, with its increased land and estate taxes, would have worsened matters. However Lloyd George made a provision in the Finance Act 1910 for the creation of the Acceptance in Lieu scheme to allow land to be given to the nation in lieu of Estate Duty.
The scheme was little used in its early years owing to the disruption of the First World War and the Treasury
HM Treasury
HM Treasury, in full Her Majesty's Treasury, informally The Treasury, is the United Kingdom government department responsible for developing and executing the British government's public finance policy and economic policy...
's insistence that any shortfall in tax caused by the scheme was made up by reductions in the budget of a government department. The government made it easier for country estates to be given to the nation in the National Trust
National Trust for Places of Historic Interest or Natural Beauty
The National Trust for Places of Historic Interest or Natural Beauty, usually known as the National Trust, is a conservation organisation in England, Wales and Northern Ireland...
Act of 1937 and the Finance Act of 1953, which allowed for the contents of houses to be transferred also. The years after the Second World war saw a large number of houses given to the nation in this manner and brought into the custody of the National Trust. A minor scandal erupted in 1977 when the Treasury refused to accept the late Lord Rosebery
Harry Primrose, 6th Earl of Rosebery
Albert Edward Harry Meyer Archibald Primrose, 6th Earl of Rosebery and 2nd Earl of Midlothian , known by his third name of Harry, was a UK politician who briefly served as Secretary of State for Scotland in 1945...
's Mentmore
Mentmore Towers
Mentmore Towers is a 19th century English country house in the village of Mentmore in Buckinghamshire. The house was designed by Joseph Paxton and his son-in-law, George Henry Stokes, in the revival Elizabethan and Jacobean style of the late 16th century called Jacobethan, for the banker and...
house in lieu of £2 million of inheritance tax, seeing it instead sold at public auction for £6.25 million and enter private hands. As a result new guidelines for the scheme were introduced by the 1980 National Heritage Act.
Conservative Minister for the Arts
Minister for the Arts
In the United Kingdom government, the Minister for the Arts is a ministerial post, usually a low to middle-ranking minister to the much senior Secretary of State, who runs the entire department and is ultimately responsibility for the department's brief....
Lord Gowrie
Lord Gowrie
Lord Gowrie may refer* Alexander Hore-Ruthven, 1st Earl of Gowrie* William Ruthven, 1st Earl of Gowrie...
provided a guaranteed allocation of £10 million per year (later increased to the present level of £20 million) from the Treasury reserves to make up the tax revenue shortfall arising from objects received for the nation. Having originally been associated mainly with the acquisition of country estates for the National Trust by the late 20th century the scheme was becoming known more for accepting works of art and archival material for national, regional and local collections. This is due to a decline in inheritance tax levels from 75% in 1975 to 40% by 1988, rising artwork prices and more effective tax arrangements made by the owners of large, historic houses. Since 1984 only one country house has been given to the nation through the Acceptance in lieu scheme, this being Seaton Delaval Hall
Seaton Delaval Hall
Seaton Delaval Hall is a Grade I listed country house in Northumberland, England. It is near the coast just north of Newcastle upon Tyne. Located between Seaton Sluice and Seaton Delaval, it was designed by Sir John Vanbrugh in 1718 for Admiral George Delaval and is now owned by the National...
which was allocated to the National Trust in 2009. The scheme continues to provide a valuable means of preserving national treasures and has provided objects worth £140 million to public collections in the five years following 2006. Though the National Trust is still a large recipient of assets, receiving more than £21 million worth in 2000–10, objects are allocated to a wide variety of institutions of all levels across the country and there are few major public collections that have not received a donation from the scheme.
Procedure
The current legislation under which the scheme is established is Section 230 of the Inheritance Tax Act 1984. The scheme applies to works of art, manuscripts, heritage objects and historic documents. In addition items must be in an acceptable condition and of "particular historical, artistic, scientific or local significance, either individually or collectively, or associated with a building in public ownership, such as a National Trust property, which will be expected to have public access for at least 100 days each year". Different rules apply to manuscripts and archive material which must have "an especially close association with our history and national life", "especial artistic or art-historical importance", "especial importance for the study of some particular branch of art, learning or history" or "an especially close association with a particular historic setting".Secretary of State for Culture, Media and Sport
The Secretary of State for Culture, Olympics, Media and Sport is a United Kingdom cabinet position with responsibility for the Department for Culture, Media and Sport. The role was created in 1992 by John Major as Secretary of State for National Heritage...
or the relevant ministers in the devolved Scottish and Welsh governments (where applicable). The minister is advised on the aquisition of an item by a panel of experts from Arts Council England
Arts Council England
Arts Council England was formed in 1994 when the Arts Council of Great Britain was divided into three separate bodies for England, Scotland and Wales. It is a non-departmental public body of the Department of Culture, Media and Sport...
in most cases (the Historical Manuscripts Commissioner at The National Archives advises on manuscripts). Until its abolition in October 2011 the Museums, Libraries and Archives Council
Museums, Libraries and Archives Council
The Museums, Libraries and Archives Council is a non-departmental public body in England and a registered charity with a remit to promote improvement and innovation in the area of museums, libraries and archives...
provided the advising panel. The panel assesses the open market value of an item and passes this to the minister who makes the final decision whether to accept it or not. The panel aims to provide an assessment of value that is fair to the offerer and the tax-payer.
Once accepted any items currently associated with buildings in public ownership are allowed to remain there, provided public access is available. If they are associated with a private building they may be granted to a public museum but lent back to the house-owner providing public access and security can be maintained. This arrangement allows for unique collections (such as the contents of country estates) to remain intact and not be dispersed or separated from their associated historic buildings. Other items might be allocated by the minister to a museum or gallery at no cost, particularly where the offerer has requested a specific institution be assigned the item. Other items are advertised to museums who are invited to apply for their allocation. In cases where the value of an item exceeds the tax settled the institution receiving the item will pay the difference to the offerer.
Due to certain tax benefits an item offered under the Acceptance in Lieu scheme is worth 17% more to the offerer than if the item was sold at public auction. This makes the scheme a particularly attractive alternative and has been described by the government as "the most important means of acquiring important works of art and cultural objects for public ownership". Some criticism of the scheme has focussed on its failure to provide for settlement of "everyday" taxes such as income tax such as occurs in France, Ireland and Australia.