Chattels and human rights

Chartered accountants Saffery Champness, whose largely private client base includes many figures from the art world, believe changing policy could be an infringement of European Human Rights.

The 1998 Finance Act has tightened the rules on chattels that qualify for tax-exempt status. They must now be of pre-eminent rather than just museum quality, and the owners must make them available for public access for a minimum period each year without prior appointment.

But the enforcement of the new rules on existing tax-exempt chattels when they come up for reassessment on the next death could constitute a breach of human rights, say Saffery Champness. Effectively, it could mean that the conditions of an existing contract for tax-exempt status are varied without the consent of both parties to the contract.

The proposal under the Act, which the Inland Revenue is consulting on until the end of July, says that chattel owners and the Inland Revenue must agree on what constitutes just and reasonable access. Factors to be borne in mind include security, insurance, planning consent and publicity.

If, however, agreement cannot be reached, the new Act has created the post of an independent special commissioner to resolve the dispute, with the power to order an open access arrangement without the owner’s consent.

Failure to follow this order will lead to a breach of the conditional exemption and to a tax bill. It is this aspect, when applied to tax-exempt chattels which come up for assessment following the next death in the family, that Saffery Champness questions.

Sotheby’s have completed a survey on chattels that currently enjoy tax-exempt status. They have concluded that only a fraction would retain that status when reassessed.

William Raymond, a consultant with Saffery Champness, is worried that this will lead to a large number of currently exempt chattels being sold abroad – there could be no protection from the Export Review Committee as the Government would already have decided that they were not of pre-eminent status.

“This is all about the Government’s policy to improve public access,” he said. “Well, access will be available... but only to those who can afford the plane ticket to visit the Getty.”

He fears that those affected may not react until it is too late. “This is not something to be taken lightly,” he warned.