Inheritance Tax and the Acceptance-in-Lieu Scheme
As a general rule assets of a deceased over the value of the nil rate band (currently £325,000) are chargeable at 40% inheritance tax.
The Acceptance-in-Lieu scheme (“AIL”)
Since 1910 the UK government has encouraged those administering estates, responsible for ensuring that the tax is assessed and paid, to consider offering works of art and important heritage objects to the nation in lieu of inheritance tax.
In addition to the advantage of being able to meet a tax liability in kind, the scheme offers a financial sweetener (known as the douceur) to provide an even greater incentive to make use of the scheme.
The art or objects must be ‘pre-eminent’: in other words, of particular historic, artistic, scientific or local significance, either individually or collectively, or associated with a building in public ownership. A very wide range of objects is accepted each year as may be seen in the annual reports published by the Arts Council.
The art or objects must be in an acceptable condition.
Offers must be made to the Heritage Team at HMRC. Those offers must be approved by the Secretary of State for Digital, Culture, Media and Sport (or the appropriate Minister in the devolved governments in Scotland and Wales) who is advised by Arts Council England’s AIL Panel. The AIL Panel consists of independent experts who seek specialist advice on the art or objects offered.
Key elements of any offer will be a valuation and justification for that valuation (generally independent opinion from more than one source is helpful); an explanation of why the object is considered pre-eminent; digital images and details of where the object can be inspected; evidence that the offeror has good legal title to the object (and details of its ownership between 1933-1945).
In order to attract some of the finest works into national ownership the government offers a financial incentive to those administering estates. The sweetener consists of a 25% “cash-back” calculated against the inheritance tax that would normally have been due.
Example: Mr Gombrich’s estate contains an important Modern British work on paper. At date of death the piece was valued by an independent expert at £100,000. Mr Gombrich’s son is the sole residuary beneficiary and executor and decides to offer the painting in lieu of the inheritance tax liability of £40,000. The AIL Panel confirm the piece to be pre-eminent and agree a value of £100,000. The douceur is calculated as 25% of the inheritance tax due on the painting: 25% x £40,000 = £10,000. Gombrich junior receives £70,000 for the piece, the tax liability is cleared and the nation gains a pre-eminent work for the public to enjoy.
Every case will be different. The scheme offers an opportunity to make a not-insignificant tax saving whilst also having the benefit making the item(s) available for the appreciation of the general public. At the same time do bear in mind that there will be occasions when an item might achieve a better overall result (tax liability included) when sold on the open market (or indeed by a private sale). If you are considering your options I would be very pleased to advise.
Art & Heritage
We put our clients in the driving seat, literally.
Classic cars are a passion, a desire and an investment. As prices have risen so has the potential for disputes. Is that history genuine? Who is the actual owner? What does ‘fully restored’ actually mean?
Whether you’re purchasing your first classic or adding to your collection, we offer insightful commercial advice on purchasing and restoration. And when it’s time to sell, we’ll help optimise the outcome.
As classic car owners as well as lawyers, we know the potential emotional and financial hazards that you may need to navigate. Get us involved early when you’re planning to purchase and we’ll help manoeuvre around problems and ensure that the right protection is in place so you can enjoy your classic with complete peace of mind.
Nicole Marmor recognised as Top International Private Wealth Lawyer by Spear’s
Founded in 2006, Spear’s is a bimonthly British Magazine for ultra high-network individuals and for the people who advise them, focusing on the latest news surrounding wealth, business culture and luxury.
Spear’s annually publish rankings on the top International Private Wealth advisers and service providers to high-networth individuals. These rankings are drawn from peer recommendations, feedback from clients, in-depth telephone and face-to-face interviews, data supplied by firms, as well as research conducted by the Spear’s editorial and research teams.
Nicole Marmor, Partner and Head of Private Wealth at Sherrards, was ranked alongside just four other “Top Recommended” International Private Wealth Lawyers for Probate and Wills for high-networth individuals in the UK.
Nicole says “I am very grateful to the Spear’s team for the time and effort put in to be recognised as a top lawyer among so much talent. It is great to see a range of individuals showcased for their expertise and drive within the probate legal industry.”
If you would like to speak to Nicole, or a member of the Private Wealth department, please contact firstname.lastname@example.org
Shaping the Sherrards of tomorrow
Abroo Khan, has now qualified from the Sherrards Training Academy and will be joining the Private Wealth team as a Solicitor.
Abroo has been a trainee with the firm now for just over two years, where she has been working alongside various departments, such as Commercial Property, Dispute Resolution, Corporate and Commercial, in order to grow her knowledge and understanding of the legal world.
Partner and Head of Private Wealth, Nicole Marmor, says, “It is brilliant news to have Abroo join our growing team. We have seen how hard she has worked throughout her time as part of the Sherrards Training Academy and we look forward to seeing her grow in her career with us.”
With regards to our Trainee Solicitors,
Max Marmor joins the Commercial Property team as a Trainee Solicitor in London, after working alongside the Dispute Resolution team and Commercial Property team as a paralegal for the past year.
We also congratulate Mike Jenkins who is promoted to Trainee Solicitor in the Commercial Property team in St Albans, after working alongside the team there for the past 10 months.
Lastly, we welcome Gabriel Cooke as a Trainee Solicitor to the Corporate and Commercial team in St Albans. Gabriel has been working alongside both the Employment, and Corporate and Commercial teams as a legal Admin Assistant for the past 7 months.
Sherrards Trainee Academy Partner, Michael Lewis says, “It is fantastic to see the Trainee Academy grow and see three excellent members of the team stay with us to begin their career as lawyers. We look forward to supporting them on their route to becoming Solicitors. I am also delighted that Abroo is qualifying with the firm after a highly successful training contract with us.”
The High Net-Worth Guide ranks Nicole Marmor for the fifth year in a row.
What is the Chamber & Partners Legal Directory?
A Chambers & Partners ranking indicates that your Firm, and departments within it, have excelled in their area of legal expertise. A band one ranking is the top level and, means the Firm is highlighted as one of very few Firms with a similar level of expertise.
In order to retain her Band one status, Nicole was assessed on the following qualities:
- Technical Legal Ability
- Professional Conduct
- Client Service
- Commercial Astuteness
Within the directory, one client commented that “Nicole was a great pleasure to work with. I felt that I received a high level of service from a very knowledgeable expert in her field.”
Nicole says: “This is a great accolade which helps to show talent and clients alike that Sherrards continue to be at the top of our game. I am so grateful for such a supportive, close-knit team who continue to ensure we rank highly in the legal directories.”
A huge thank you to our referees for providing commentary on Nicole and her team, and the private wealth team for working hard to achieve this ranking in the High Net-worth Guide.
Prem Shergill on Sherrards: Client Testimonial Video
We asked Prem Shergill, IFA at Grosvenor Wealth Management, to speak to us about how the Sherrards Private Client team supports her and her clients.
Prem kindly shares how her clients are often referred to our Private Wealth teams to help her clients to protect their assets.
She says “Everyone at Sherrards is very friendly, professional and full of knowledge and expertise.”
To find out more about Prem and Grosvenor Wealth Management, please click here.
Anne-Maree Dunn on Sherrards: Client Testimonial video
We asked Anne-Maree Dunn, Client Partner and Head of Tax at WMT to sit down with us and talk about working alongside the teams at Sherrards. This comes as part of our client testimonial video project to showcase the Sherrards teams, the people we support and how we support them.
Anne-Maree advises business owners and individuals on tax opportunities and challenges and works closely alongside many of the team from Sherrards including our Corporate and Commercial, Commercial Property, Employment, Residential Property and Private Wealth teams.
These videos were filmed by Pearldrop Video Production at The Hub on Verulam.
To find out more about WMT and Anne-Maree Dunn, click here.
Marriage and Civil partnerships: Some thoughts from a succession and inheritance tax specialist
With the wedding season upon us, it is worth reminding ourselves of several key considerations when entering into marriage or a civil partnership from a succession and inheritance tax perspective.
- Under English law, marriage/civil partnership automatically revokes a Will. This is a quirk of English law – it is not applicable in Scotland and in other European jurisdictions.
It means that if you have made a Will prior to getting married and your Will was not made in contemplation of your marriage, then following your marriage, your estate will pass under the Intestacy Provisions. This may not be what you would like especially if you are entering into marriage with different levels of assets. You may already own a property jointly with another person such as your sibling, and, in the event that something should happen to you, you may wish your share to pass to your sibling rather than your new spouse.
- If it is not your first marriage, you should ensure that any new Will is carefully drafted to protect any children from your first marriage. If you leave everything to your second spouse, you cannot guarantee that they will look after your children as well as their own. This could mean that your children may have to bring a claim on the estate of the second spouse – a costly and stressful process!
- There is no such thing as a common law spouse under succession and tax laws (including both IHT and CGT). Therefore, if you have been in a long-term relationship but are neither married nor in a civil partnership, unless you have made a Will, your partner is not entitled to any of your estate. Furthermore, there are no tax exemptions for assets passing to your partner even if you have made a Will. For example, if you own a property together as joint tenants so that on your death your half share automatically passes to your partner by survivorship, if your half share is worth more than £325,000 (the current IHT exemption), then the balance would be subject to tax at 40%.
As clinical as it may sound, one of the best ways of saving inheritance tax is to get married/enter into a civil partnership. The latter can be both a same sex or opposite sex relationship.
If you have not made a Will but were maintaining your partner, then he or she would have to bring a claim against your estate for financial provision. However, they can only do so if when you died you were domiciled in the UK.
- Prenups have been recognised in the English Court following the Radmacher Case and they may be worth considering if one party comes to the marriage/civil partnership with substantially more assets.
- Finally, many people will be considering making cash gifts to the happy couple. Whilst there are a number of exemptions available for gifts from an individual on marriage/civil partnership including £5,000 to a child; £2,500 to a grandchild/great grandchild; and £1,000 to any other person, anything above those figures, after taking into account the £3,000 annual exemption, will be subject to the 7-year rule for larger gifts.
Bear in mind that if you are making a gift other than cash, there could also be CGT implications.
The above is not an exhaustive list but highlights a few matters worth considering.
Arthur Byng Nelson
Arthur has a particular specialism in art-related matters. He advises artists and those responsible for artists’ estates (such as family members, executors and trustees) on legal, commercial and strategic planning. One of his international artist clients comments “This guy is saving my life!”.
Arthur advises collectors and owners of art and heritage property on tax matters specific to this area such as the acceptance in lieu scheme, conditional exemption and the cultural gifts scheme.
A number of clients have expressed great regard for Arthur’s ability to understand the human dynamics in a situation and to advise members of families sympathetically and straightforwardly.
Arthur is a member of STEP, PAIAM, International Catalogue Raisonné Association, Institute of Art & Law and the Charity Law Association.
Arthur is a member of the C20 Society (registered charity 1110244) and offers free simple wills as part of their “Leave a Legacy” initiative. Find out more on C20’s website by clicking here.