Underpinning every piece of tax planning in relation to works of art (whether taken in isolation or as part of a wider assessment of assets) is a valuation. 

Typically, a valuation for tax purposes is in the context of a probate, for inheritance tax (IHT) purposes, but the same principles of valuation apply at all other times. The probate valuation is essentially a reactive exercise required for compliance purposes and the division of assets, whereas a valuation obtained for the purpose of strategic tax planning is proactive. 

Clients and advisors often focus on strategies for reducing a tax burden and, indeed, there are many opportunities, such as through appropriate application of reliefs and exemptions. However, at least as important is to ensure that the valuation underpinning those strategies has been undertaken properly, that it will be robust in the face of His Majesty’s Revenue and Customs (HMRC) enquiries and that it will provide a proper basis for any division of family assets.

Art valuers can produce many different types of valuation for a range of purposes, but it is only a valuation produced for tax purposes that should be used for planning and tax compliance. Before looking in more detail at the requirements for a tax valuation and the key concept of ‘open market value’, it may be helpful to recap on other types of valuation that might be offered.