Shorter Reads

Gifting in the Arts (CGS v AIL)

Philanthropic giving and Acceptance in Lieu scheme (AIL) and the Cultural Gifts Scheme (CGS) are explained in our latest Lifetime Giving article.

1 minute read

Published 11 October 2021

Share

Key information

  • Sectors
  • Media arts and culture

The Arts Council England saw a record-breaking year in 2020 with the value of cultural objects and art entering public ownership equating to an impressive £64.5 million with £40 million of tax liabilities being settled in return.

Philanthropic giving of this nature is typically facilitated by the Acceptance in Lieu scheme (AIL) and the Cultural Gifts Scheme (CGS), both of which were introduced to encourage giving in the arts and cultural sectors to museums and other institutions for the nation to enjoy.

The Arts Council England advises HM Revenue & Customs as to which items qualify as pre-eminent for these purposes, with the emphasis on items showing a significant association to British history, national life or a particular historic setting, objects of artistic or art-historical interest and items of academic value.  Typical items may include archive collections, paintings, prints and sculptures.

AIL – Inheritance Tax (IHT)

In exchange for a qualifying gift under the AIL scheme, the HM Revenue & Customs agree to forego all or part of an estate’s IHT liability.  Whilst this scheme can only be utilised by the executors of an estate following the death of the owner of these qualifying items, it can be very generous and beneficial to the deceased’s heirs.

Once a value for the qualifying object(s) has been agreed and the potential net value after the deduction of IHT has been quantified, the AIL scheme offers an additional refund of IHT, known as the ‘douceur’ or ‘sweetner’, equal to 25% (10% for land and buildings) of the IHT that would have otherwise been paid.  With the benefit of the douceur, this effectively results in items being worth more in real terms if offered in lieu of IHT than sold on the open market.

CGS – Income (IT) and Capital Gains Tax (CGT)

In contrast, the CGS allows an individual to gift qualifying objects during their lifetime and claim a tax reduction equal to 30 percent of its value against their IT or CGT liabilities (or a combination of the two).  To fully utilise this tax saving incentive, the tax reduction can be spread over up to five tax years beginning with the tax year in which the offer is registered by the Arts Council England.

If you are fortunate enough to own objects of pre-eminent significance and you are considering giving them to the nation, there are potentially sizable tax benefits and it is worthwhile analysing the best case scenario for your personal tax and financial circumstances.

This article is part of a Lifetime Giving series. Read our latest article on how you can support your children in buying their first home.

Related latest updates
PREV NEXT

Related content

Arrow Back to Insights

Shorter Reads

Gifting in the Arts (CGS v AIL)

Philanthropic giving and Acceptance in Lieu scheme (AIL) and the Cultural Gifts Scheme (CGS) are explained in our latest Lifetime Giving article.

Published 11 October 2021

Associated sectors / services

The Arts Council England saw a record-breaking year in 2020 with the value of cultural objects and art entering public ownership equating to an impressive £64.5 million with £40 million of tax liabilities being settled in return.

Philanthropic giving of this nature is typically facilitated by the Acceptance in Lieu scheme (AIL) and the Cultural Gifts Scheme (CGS), both of which were introduced to encourage giving in the arts and cultural sectors to museums and other institutions for the nation to enjoy.

The Arts Council England advises HM Revenue & Customs as to which items qualify as pre-eminent for these purposes, with the emphasis on items showing a significant association to British history, national life or a particular historic setting, objects of artistic or art-historical interest and items of academic value.  Typical items may include archive collections, paintings, prints and sculptures.

AIL – Inheritance Tax (IHT)

In exchange for a qualifying gift under the AIL scheme, the HM Revenue & Customs agree to forego all or part of an estate’s IHT liability.  Whilst this scheme can only be utilised by the executors of an estate following the death of the owner of these qualifying items, it can be very generous and beneficial to the deceased’s heirs.

Once a value for the qualifying object(s) has been agreed and the potential net value after the deduction of IHT has been quantified, the AIL scheme offers an additional refund of IHT, known as the ‘douceur’ or ‘sweetner’, equal to 25% (10% for land and buildings) of the IHT that would have otherwise been paid.  With the benefit of the douceur, this effectively results in items being worth more in real terms if offered in lieu of IHT than sold on the open market.

CGS – Income (IT) and Capital Gains Tax (CGT)

In contrast, the CGS allows an individual to gift qualifying objects during their lifetime and claim a tax reduction equal to 30 percent of its value against their IT or CGT liabilities (or a combination of the two).  To fully utilise this tax saving incentive, the tax reduction can be spread over up to five tax years beginning with the tax year in which the offer is registered by the Arts Council England.

If you are fortunate enough to own objects of pre-eminent significance and you are considering giving them to the nation, there are potentially sizable tax benefits and it is worthwhile analysing the best case scenario for your personal tax and financial circumstances.

This article is part of a Lifetime Giving series. Read our latest article on how you can support your children in buying their first home.

Associated sectors / services

Need some more information? Make an enquiry below.

    Subscribe

    Please add your details and your areas of interest below

    Specialist sectors:

    Legal services:

    Other information:

    Jurisdictions of interest to you (other than UK):



    Enjoy reading our articles? why not subscribe to notifications so you’ll never miss one?

    Subscribe to our articles

    Message us on WhatsApp (calling not available)

    Please note that Collyer Bristow provides this service during office hours for general information and enquiries only and that no legal or other professional advice will be provided over the WhatsApp platform. Please also note that if you choose to use this platform your personal data is likely to be processed outside the UK and EEA, including in the US. Appropriate legal or other professional opinion should be taken before taking or omitting to take any action in respect of any specific problem. Collyer Bristow LLP accepts no liability for any loss or damage which may arise from reliance on information provided. All information will be deleted immediately upon completion of a conversation.

    I accept Close

    Close
    Scroll up
    ExpandNeed some help?Toggle

    < Back to menu

    I have an issue and need your help

    Scroll to see our A-Z list of expertise

    Get in touch

    Get in touch using our form below.



      Business Close
      Private Wealth Close
      Hot Topics Close