The Objects Whose Price Was Set by a Tax Bill and Not a Buyer

Some of the best objects in this archive have no price and never will

A market price requires two parties who could have walked away. Most of the numbers in this archive have that behind them, which is what makes a hammer price worth recording and worth separating from a premium. A significant group of objects here moved instead because somebody died and a tax fell due, and those transfers produce either no number at all or a number that looks like a price and is not one.

This is not an accounting curiosity. It decides where some of the most important objects in Europe physically are, because the mechanisms exist precisely to keep an object in the country when the alternative is a sale abroad. And it means that anybody reading a museum's acquisition line as evidence of value is frequently reading the output of a tax calculation.

The Louvre did not buy the most famous Vermeer in France

The Astronomer entered the French national collection in settlement of a death duty. The Louvre's record for RF 1983 28 gives the owner as Etat, the acquisition mode as dation and the acquisition year as 1982 to 1983, and the picture came from Guy de Rothschild. Under the dation en paiement an heir facing transfer duties may discharge them by handing over a work of art at an agreed value instead of paying money. The state receives the object and the family receives a credit against a tax bill.

So there is no acquisition price for this painting. That is worth saying carefully, because the natural assumption when a museum publishes no figure is that the figure is being withheld. Here there is nothing to withhold. The only number in the transaction is the valuation agreed for tax purposes, which has not been published in anything we have read, and any figure quoted as what the Louvre paid is either that valuation or an invention.

The mechanism also explains why the picture is in Paris. A family holding a Vermeer and facing a large death duty has two obvious routes, and one of them is a sale abroad. The dation makes the tax bill itself the lever that keeps the object in the country, which is a quieter instrument than an export ban and a more reliable one, because it gives the family a reason to cooperate rather than an obstacle to litigate.

The V and A prints the mechanism in the credit line

The credit line on the Devonshire Hunting Tapestries is unusually explicit, and reads: accepted by HM Government in lieu of tax payable on the estate of the 10th Duke of Devonshire and allocated to the Victoria and Albert Museum. It appears on all four hangings. The Boar and Bear Hunt, museum number T.204-1957, was made in Arras around 1425 to 1430, is over ten metres wide at the top edge and has an estimated weight of 50 kg.

The timing is part of the story. The 10th Duke died in 1950 and the transfer became final in 1957, seven years later, which is a fair indication of how long these settlements take. Acceptance in Lieu exists because a cash tax bill on an estate rich in land and inherited chattels and poor in liquid money has historically forced the break-up and sale of exactly the collections a country might wish to keep whole. The tapestries had already survived being cut up for warmth in the 1840s. The 1957 settlement is what stopped the second dispersal.

HMRC publishes the arithmetic, and the arithmetic has a name

The scheme runs on statute and the statute is easy to find. Under sections 230 and 231 of the Inheritance Tax Act 1984, the Board may, with the agreement of the departmental Ministers responsible for the environment and arts, accept property in whole or part satisfaction of a capital transfer tax or inheritance tax debt, and property may also be accepted against interest accrued on capital transfer tax, inheritance tax or estate duty as well as against the tax itself. The heritage qualification comes from sections 30 to 35 and 78 to 79, which cover works of art and other national heritage objects, land of outstanding scenic, historic or scientific interest and buildings of outstanding historic or architectural interest.

The number that results is called a special price, and HMRC's own guidance describes how it is reached: an agreed value is established for the item, and then a proportion of the tax given up on the item is deducted, under an arrangement known as the douceur. A credit equivalent to that special price is then made to the accounting record for the case. Since 1987 there have been two bases for the valuation date, one using the value at the offer date with no interest accruing and one using the value at formal acceptance with interest running until then.

Twenty-two million pounds is a price with a subsidy inside it

The National Gallery bought Raphael's Madonna of the Pinks, NG6596, in March 2004 for 22 million pounds from the 10th Duke of Northumberland's Wills Trust. It is a small picture, oil on yew, 27.9 by 22.4 cm, dated about 1506 to 1507. The purchase followed the blocking in September 2002 of a proposed 35 million pound sale to the Getty Museum, and it was a private treaty sale rather than an open one.

The gap between 35 million and 22 million is not a discount the seller chose to give. It is the douceur, the tax relief that makes a private treaty sale to a domestic museum worth a seller's while, and it is the same lever as the special price in an Acceptance in Lieu case, applied to a sale instead of a settlement. The gallery's own acquisition credit lists where the 22 million came from: the Heritage Lottery Fund at 11.5 million, the American Friends of the National Gallery at 10.5 million out of John Paul Getty junior's endowment, the Art Fund with a contribution from the Wolfson Foundation, the George Beaumont Group, Sir Christopher Ondaatje at 1 million and a public appeal at 70,000.

Read that as a market comparable and you will be wrong twice over: once because the headline is depressed by a tax relief, and once because the pool of possible buyers had been cut to one by an export decision. It is a real number and a real transaction. It is just not a measure of what the picture would fetch.

Spain reached the same result through an export prohibition

The Prado acquired Bruegel's The Wine of Saint Martin's Day for 7 million euros, approved unanimously by the Real Patronato on 20 October 2010 and drawn from an extraordinary state budget line, a month after the Ministry of Culture announced the attribution. Press accounts at the time put the picture's likely value on the open international market as high as 100 million euros, roughly fourteen times what was paid.

The gap is the intended effect of the law rather than a bargain. Spain's board for the classification, valuation and export of Spanish historical heritage declared the picture a bien de interes cultural, a designation under which permanent export cannot be authorised. That removed the international auction market as a realistic alternative and left a below-market private treaty sale to the national museum as the only route to a prompt sale at all. Different statute, different country, same shape: a national institution acquires at a price that is not, and is not intended to be, the open-market price.

The same pressure can produce a world record instead

Leonardo's Codex Leicester shows what happens when a death duty is settled in cash. Christie's sold it in London on 12 December 1980 for the Trustees of the Holkham Estate, and contemporary American reporting says Lord Coke was selling to meet inheritance tax on the estate and its collection, which is the ordinary reason an English country house puts its best object in a saleroom. Bidding opened at about 1.4 million dollars and lasted under two minutes. Armand Hammer won it, and the price broke the record for any manuscript.

Fourteen years later, on 11 November 1994, it sold again at Christie's in New York for 30,802,500 dollars, premium included, after two minutes and forty seconds of bidding, to Bill Gates, with the Cariplo Foundation of Milan as underbidder. So the identical pressure that produced no number at all for the Vermeer produced two of the largest numbers in the history of the manuscript market for the Leonardo. The variable is not the object and it is not the size of the tax. It is which country's law applied and whether a national institution wanted the thing enough to act.

Objects to which none of these mechanisms has ever applied

Two records here are useful precisely because they generate no number at all and never did. The Baptistere de Saint Louis has been state property and never privately owned or sold since at least 1793, and this archive found no auction, private sale, insurance valuation, dation or export application anywhere in its documented history. None of the mechanisms that would produce a figure has ever applied to it, which is a different condition from a price being unknown.

The Palmer Cup is the other kind of negative. It came in with the Waddesdon Bequest in 1898, and that bequest was not structured as a tax relief instrument, because there was no equivalent of Acceptance in Lieu in 1898 and no source we consulted claims one. It is worth being exact about that rather than assuming every great gift to a national museum has a tax reason behind it, because a great many of them do and this one does not.

A third case shows the discipline being applied to a tempting inference. The Luck of Edenhall was sold to the V and A in 1959 by a family that had already given up Eden Hall, and mid-twentieth-century British death duties are well known to have driven many comparable sales. No source we found states that they caused this one. The record says so, and declines to make the connection, which is the right call even though the connection is probably true.

How to read an acquisition line

Ask first whether any money moved. If the credit line says in lieu of tax, dation, accepted in satisfaction or allocated, then it did not, and there is no price to find. If a figure is published, ask next whether the buyer pool was open at the moment of sale, because an export stop, a national designation or a pre-emption right can reduce it to one before any negotiation starts.

Then look for the subsidy. In the United Kingdom the word to search for is douceur, and its presence means the published figure is a market valuation less a share of the tax forgone. Elsewhere the same effect arrives under other names, and the tell is usually a reported open-market valuation sitting well above the price actually paid, as it does for the Prado Bruegel at 7 million euros against a reported 100 million. None of this makes the figure false. It makes it a figure about a tax system, and a comparable drawn from it will be wrong in a predictable direction.

The public cost is real and it is never published

Every one of these transfers has a price that nobody prints, which is the tax the state chose not to collect. For the Vermeer it is whatever the agreed valuation was, forgone entirely. For the Devonshire tapestries it is the special price credited against the 10th Duke's estate. For the Madonna of the Pinks it is the part of the 13 million pound gap between the Getty offer and the National Gallery purchase that the douceur accounts for.

We are not arguing that any of this is wrong. On the evidence it works: four objects that would otherwise have left, or been broken up, are on public display, and the Vermeer case in particular shows an instrument doing quietly what an export ban does adversarially. But a scheme whose whole purpose is to convert public money into public access ought to be legible as such, and at the moment the only figure a reader can see is the one that understates it.

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