Private client tax is a geeky pursuit, and it is probably only a practitioner who, after watching the excellent recent film “The Woman in Gold” would ask at the end “was there a big tax bill?” However, Eva Rosenberg, in an article on Marketwatch, has asked just that, rather arresting, question.
The film tells the true story of Maria Altmann, whose family came from Vienna. Her aunt, the young and wealthy socialite Adele Bloch-Bauer, was the subject of one of Gustave Klimt’s most famous paintings. This painting, which gives the film its title, was seized, along with other valuable artworks, under the Nazi regime and the film describes how Maria and her lawyers fought a long litigation battle in the US (where Maria had become a naturalised citizen in 1945) to get it back from a reluctant Austrian government. The good news is that, ultimately, they not only won but were also, as the Rosenberg article explains, able to ensure that the portfolio (worth some US$325 million) was entirely free of US gains taxes when part of it had to be sold to cover the litigation costs.
Which raises the question of what the result would have been if Mrs Altmann had fled, as so many victims of persecution did, to the UK instead? How are these issues treated under the UK tax regime?
As far as Income Tax and Capital Gains Taxes are concerned, there are a number of concessions which apply. Payments under most of the various “survivor” compensation schemes, and in respect of “dormant accounts” of holocaust victims at Swiss banks, are covered by exemptions from Income Tax and Capital Gains Tax. Even outside these schemes, where property has been illegally seized by a foreign government and compensation is paid, there is a an exemption from Capital Gains Tax and, if an artwork is returned in these circumstances, the person receiving it is deemed to acquire it at market value, so Mrs Altmann would have no problem, there.
What about Inheritance Tax? Inevitably, survivors of the Second World War tend to be elderly (Mrs Altmann herself died in 2011, at the age of 94). As far as the compensation schemes are concerned, there is a special extra-statutory concession, F20, which covers the situation. The Personal representatives dealing with the estate of someone entitled to claim under one of the schemes, or someone who received payments during their lifetime, are entitled to deduct the scheme payments from the value of the deceased’s estate.
Where illegally-seized property is returned or a compensation payment is received, however, there is no such special exemption. In that case, it is the Chancellor of the Exchequer who is likely to be a major beneficiary when valuable artworks have been returned to a victim family, and the claimant then dies.