You might be aware of how gifting part of your estate to charity impacts Inheritance Tax (IHT) but what happens if you gift assets to the nation?

There are two schemes which outline significant tax advantages if pre-eminent objects or collections are left to the public.

Pre-eminent objects, or collections, include assets that are of interest to the nation or have scientific, historic or artistic interest.

This could include works of art, books, manuscripts, land, scientific objects, etc.

If you have assets that could be national treasures, you should consider gifting them to the nation in your Will, in order to qualify for the Acceptance in Lieu scheme.

What is the Acceptance in Lieu (AiL) scheme?

The AiL scheme allows those liable for IHT to pay it by transferring important cultural, scientific or historical objects to the nation.

These items are then allocated to public collections to preserve the nation’s cultural heritage.

The items offered in lieu of tax are independently valued by The Acceptance in Lieu Panel, and if accepted, are considered as satisfying tax due to the value of the accepted item.

The total taxable amount of the estate is also reduced, as the value of the item is excluded from the estate’s valuation.

For your assets to be considered for the AiL scheme, you must outline your wishes in your Will.

The total tax reduction from this scheme is capped at £30 million.

What is the Cultural Gifts Scheme?

The Cultural Gifts Scheme offers a tax reduction when assets are donated to the public, although this does exclude land.

Similarly to the AiL scheme, the Acceptance in Lieu Panel will advise on the value of assets.

However, this relief is applicable to gifts to the nation provided during the lifetime.

At the time of donation, this provides a tax relief (Income Tax, Capital Gains Tax or Corporation Tax) that is proportionate to the value of the asset. The tax reduction can be spread over five years.

Once gifted to the public or nation, this is then exempt from IHT as it is no longer considered part of the estate.

Before deciding whether to gift items to the nation, it is essential to understand the impact on the estate and beneficiaries, as well as the potential liabilities.

To navigate these complex decisions, it’s wise to seek advice from professional tax advisors with expertise in this area.

Contact our probate experts for advice on tax planning matters such as this.