Artistate Q & A

Relationship with Museums

1. How can I place my work(s) in a museum?

Works of art can be placed in a museum through loans (permanent or temporary), sales, gifts or bequests. It is advisable to record the relationship in writing in order to confirm the nature of the relationship (if a loan, the museum is merely a possessor of the art and must return it but if a gift, the museum becomes the owner of the art and must not return it) and to address issues such as shipping, care, conservation and copyright.

Loans are typically arranged either by a gallery in charge of managing the artist’s institutional presence, by artists themselves, or by their estate after their death. In the context of large exhibitions, such as retrospectives, loans can include works already sold to and owned by third parties, with their consent. Importantly, loans do not transfer ownership. This means that the museum does not acquire the title to the works by virtue of the loan. The responsibility for loss or damage to the work, however, must be transferred to the museum for the duration of the loan. Both temporary and permanent loans should be recorded in a written loan agreement.

Museums can also purchase the artist’s work, either through the gallery representing the artist, or directly from the artist or their estate. A museum may express interest either in acquiring an existing work by the artist or commissioning the artist to produce a bespoke work. In both instances, the museum acquires ownership of the work. If a museum wishes to purchase an existing work, the transaction should be recorded in a written sale and purchase agreement. There are two types of commission agreements. In the first, the museum may pay for the creative labour of the artist, materials, and other costs associated with the creation of the commissioned artwork. The artist effectively provides a service, at the end of which the museum also obtains ownership of the artwork. This type of agreement also imposes duties on the artist. The artist may have to obtain approval for his or her designs, allow the museum to inspect the work while in progress, and abide by a deadline for completion. It is therefore essential that the terms of such a contract are carefully and expressly set out and understood by the parties to avoid disputes. In the second and less common type of agreement, the artist simply sells the commissioned work to the museum once it is completed. This is a sale and purchase agreement. It may give greater creative independence to the artist, however the museum is not contractually bound to purchase the work before completion and until a sale and purchase agreement is signed.

Artist or their estates can also choose to donate the artist’s work to a museum. This can be done during an artist’s lifetime, in which case it is referred to as a lifetime gift, or after their death, as a bequest specified in the Will. The estate can also decide to gift works by the deceased artist to a museum. However, it is important to note that this transaction is bilateral. A museum may choose not to accept the offer of a gift or bequest for a variety of reasons. A work may not be a good fit for the museum’s existing collection from a curatorial perspective, or may not comply with its collection policy. It is therefore important that prior to naming a specific museum in a Willill, enquiries are made with the museum on whether the museum would accept the bequest. Many museums will not offer a guarantee of future acceptance but will be able to provisionally assess the suitability of the work for their collection. The tax consequences of gifts or sales to museums are considered below. The Art Fund can also play as a ‘fall-back’ recipient, if the chosen museum is unable to accept a gift. The Art Fund’s Trustees can find a suitable alternative museum to accept the work.

2. Can I subject a loan, gift or bequest to conditions?

Every loan, gift or bequest can be individually negotiated and therefore set out conditions, for example in relation to the display or care of the artwork. In the context of a loan sought by the museum, the artist has the upper hand and can be more demanding. In the context of gifts and bequests, however, statutory limitations might apply and the museum receiving the work may not be able to accommodate any or all conditions.

3. How do I stand to benefit from a gift, bequest or sale to a museum?

A gift or bequest can attract tax benefits. In the UK, tax incentive schemes exist to reward owners of art, including artists themselves, who gift or bequeath works of art to museums. Each scheme sets out criteria which both the work and the donor must satisfy. For example, all three schemes listed below require the work to be of ‘pre-eminent’ quality or currently or formerly kept in a significant building. Contemporary art is included in the schemes, however the decision over whether a work of art is of ‘pre-eminent’ quality will be made by the Government on the advice of a panel of curators, dealers and others with relevant expertise across different fields of art and art history.

The Cultural Gifts Scheme allows artists who donate their art to claim a tax reduction equal to 30 per cent of the work’s value against their Income or Capital Gains Tax bill, or a combination of the two. The Cultural Gifts Scheme is administered by the Arts Council England. Further Guidance is available here.

The Acceptance in Lieu Scheme permits the transfer of art to the nation to settle an Inheritance Tax (or Estate Duty) bill in part or full payment of the tax. Offers under this Scheme are made to HMRC. The artwork will be assessed by the panel of experts advising the Government, and if accepted, allocated to a UK museum, gallery or appropriate historic house. Further Guidance is available here.

The Conditional Exemption Tax Incentive Scheme allows for a waiver of Inheritance Tax or Capital Gains Tax on the value of an asset which qualifies for that exemption when it passes to a new owner on death or is gifted. In order to benefit from the exemption, the new owner must agree to look after the item, allow public access to it and keep it in the UK. The Conditional Exemption Tax Incentive Scheme is managed by HMRC. Further guidance is available here.

In addition, gifts to the Art Fund, a UK registered charity, can bring benefits. The value of any gift to the Art Fund in a will is deducted from the relevant estate before any liability to Inheritance Tax is calculated. 

A private treaty sale, whereby a sale is agreed with a museum (instead of putting the work up for sale to the highest bidder on the open market) can also attract tax benefits. The museum can buy the work of art (if it meets certain conditions) for its fair market value, less the Capital Gains Tax and/or Inheritance Tax which may otherwise be owed as a result of selling on the open market. The savings made by not paying Capital Gains Tax and/or Inheritance Tax are shared between the seller and the museum.  The benefit is usually split so that the seller receives 25 per cent of the saving (known as the douceur), and the purchase price to the museum is reduced by the remaining 75 per cent. Further guidance is available here.

By Mona Yapova, Constantine Cannon LLP

The law varies from country to country.  In this section of the website, we describe the law as it applies in England and Wales.  Whilst similar principles apply in other European countries, and to a lesser extent, in the USA, please do not assume that the law is the same.  For example, artists have stronger moral rights in countries applying the Napoleonic codes than in England and Wales. The information provided on this page is general and may not apply in a specific situation. In doubt, please seek legal advice. This information is not intended to create, nor does receipt of it constitute, a lawyer-client relationship. The authors accept no responsibility for the content of this page.

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