November 2008

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In February 2007 Apollo published a list of the 25 most important works in private hands in the UK, works that deserved to be acquired for the nation if at all possible. Yesterday’s announcement that the Duke of Sutherland has offered to sell to the nation two of those works, Titian’s Diana and Actaeon and Diana and Callisto, has been received with due acknowledgment that the offer price, of £50m per picture, is notably generous. Moreover, the Duke has offered the National Galleries in London and Edinburgh the opportunity to pay for the two paintings in instalments over six years. The galleries have until the end of the year to decide whether or not to accept the offer; if they don’t, the paintings will be sold at auction next year.

This all seems notably fair behaviour by the Duke. It certainly compares very well with the Duke of Northumberland’s behaviour in selling Raphael’s Madonna of the Pinks to the Getty Museum without so much as consulting the National Gallery, London, where it was on public show. Despite the usual chippy protests – Jonathan Jones in The Guardian has said that the Duke of Sutherland is an example of ‘the aristocracy demanding money with menaces’ – it is hard to see what objection can possibly be made to the Duke’s behaviour, unless you take the line that all great art shoud be expropriated for the public benefit, without compensation for its owners. But, thank God, we live in the UK in 2008, not Russia in 1917.

It seems to me that there is a pretty good chance that the National Galleries will succeed. The paintings are incontestably supreme masterpieces, and far more popular in their appeal than The Madonna of the Pinks. If they were to be sold abroad, the heart would be torn out of the National Gallery of Scotland, where they have been on show since 1945. If all does go ahead smoothly, it will also be a triumph for the nation’s tax regime governing the sale of works of art. That may sound odd, given that the Duke is not offering the works in lieu of tax, as he did with Titian’s Venus Rising from the Waves, acquired by the National Gallery of Scotland in 2003 for £14m, partly in lieu of death duties.

In fact, the nation has benefited from two schemes. The first is so-called ‘Conditional Exemption’ from capital taxes, which allows private owners to defer paying capital taxes until a work is actually sold, rather than on an event, notably death, that incurs a tax liability. This arrangement, which goes back to the late 19th century, is often seen simply as a benefit to the tax payer, whereas in fact it is designed to help public collections in the UK, by providing a brake on the too-frequent sales of works from private collections. The Sutherland Titians are a shining example of how this has benefited the British public, for without it there can be no doubt that the paintings would have been sold long ago, probably in the 1950s, and would now almost ceratinly be abroad.

Secondly, the nation benefits from the private-treaty sale arrangement. In effect, this means that the Duke is able to sell the works to a public collection at a discount in return for an exemption from capital taxes. The discount is traditionally around 25%. Such a sale benefits the seller, who would otherwise have to pay 40% in tax if the work were sold on the open market, but just as importantly it benefits the nation, as it aquires the work at a hefty discount. So on a private-treaty sale of £100m, the Duke might expect to receive £75m, as opposed to the £60m he would end up with after paying tax if he sold the paintings for £100m at auction (although it is very likely that they would fetch very much more), and the National Galleries spend £75m on paintings that would cost them at least £100m on the open market. Here is an example of the taxman getting things right.

For more information on private treaty sales, go to http://www.mla.gov.uk/website/programmes/cultural_property/pts/Private_Treaty_
Sales

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