Hunting Sleepers (Part 2)

29th June 2026 | Arthur Byng Nelson | Private Wealth, Art & Heritage, Art collecting

Part 1 of the Hunting Sleepers series explored the commercial considerations of using a limited company (SPV) to acquire works of art. This second instalment focuses on the tax implications, examining the key capital gains tax and inheritance tax considerations that can influence the most appropriate ownership structure.

To read part 1, click here. 

Tax: The Key Structural Considerations

Capital Gains Tax

An individual higher or additional rate taxpayer pays CGT at 24% on a gain from the sale (or gift to another person) of a work of art; a basic rate taxpayer pays 18%. Using as an example a gain of £300,000, a higher rate individual taxpayer retains approximately £228,000.

Alternatively within a SPV the same gain realised attracts corporation tax at 25%, with the proceeds then held in the company. Extracting them by dividend costs a higher rate taxpayer a further 33.75% on amounts above the £500 dividend allowance. The combined effective rate lands somewhere between 45% and 50% of the original gain: roughly double the personal CGT cost. On the same £300,000 gain, the shareholder may retain only £150,000 to £160,000. Unless the SPV is delivering inheritance planning benefits that outweigh that difference, it is difficult to justify establishing a SPV for a single acquisition.

Inheritance Tax

The inheritance tax picture however runs in the opposite direction and is where the SPV proves more interesting for consideration.

An individual owing a works of art personally will attract IHT at 40% on death with no automatic relief, and the art market’s illiquidity makes this particularly uncomfortable: executors have six months to settle the charge and a forced timetable for sale of a significant work is less likely to achieve best results.

Compare this to the position where a SPV has been used: shares in the SPV can be gifted in tranches during the owner’s lifetime, settled on a discretionary trust or structured with different share classes to direct capital to different beneficiaries. A physical painting cannot be divided or transferred in stages without a sale. Each gift of shares is a potentially exempt transfer that falls outside the estate entirely if the donor survives seven years and does not retain benefit from the asset: a meaningful planning tool for a buyer with a long horizon. Business Property Relief could in principle shelter the shares from IHT entirely, but only where the SPV is genuinely trading rather than passively holding an asset; HMRC scrutinises this characterisation closely in the art market context and the relief should not be assumed.

Summary

For a one-off acquisition of a single work at modest value, direct personal ownership will generally be simpler and more tax-efficient on exit. An SPV becomes more attractive where: (i) provenance risk is elevated; (ii) multiple investors are involved; (iii) a portfolio of works is being assembled with trading intent; or (iv) long-term IHT planning is a priority. In every case the structure should be determined in advance of acquisition. Plan ahead and be ready before the sleeper wakes up!

To find out more contact Arthur Byng Nelson, or the Private Wealth team. 

This article is for general information only and does not constitute legal or tax advice. Specialist advice should be taken before any acquisition or structuring decision.