Introduction Details of the Section
2.The Schedule comprises four parts. Part 1 of the Schedule outlines the circumstances when the tax reduction will apply to a gift of pre-eminent property.  Parts 2 and 3 of the Schedule set out the details of how the tax reduction will apply to individual and corporate donors respectively.  Part 4 of the Schedule makes general provisions in connection with the tax reduction.
3.Paragraph 1 of the Schedule outlines the circumstances when a gift of pre-eminent property for the benefit of the public or the nation will be a qualifying gift for the purposes of the tax reduction.  In particular, a gift that qualifies for the tax reduction must be registered and accepted under the scheme set up by the Secretary of State.
4.Paragraph 2 of the Schedule specifies that the provisions in Part 2 of the Schedule apply to the income tax and capital gains tax liabilities of individual donors.  The donor must be acting in their own personal capacity, so the tax reduction does not extend to individuals who are acting as trustees or personal representatives.
5.Paragraph 3 of the Schedule sets out how the tax reduction is to be applied.  If an individual makes a qualifying gift then part of that individual’s tax liability for a relevant tax year is treated as having been paid, leading to a reduction in the amount of tax the individual still has to pay for that period. An individual may, subject to agreement in accordance with the scheme, apply the tax reduction against their income tax and/or capital gains tax liabilities in the tax year in which the offer was registered or any of the succeeding four tax years.
6.Paragraph 4 of the Schedule sets out how an individual may allocate the tax reduction across more than one relevant tax year.  The “total tax reduction” is first computed under paragraph 4(5).  The total tax reduction for an individual is 30 per cent of the value of the qualifying gift.  The individual may then agree, pursuant to the scheme, that the total tax reduction amount is to be allocated across the five relevant tax years in whatever amounts they wish, including nil amounts for any year.  Where an individual has on a previous occasion made a gift of another pre-eminent object under the scheme, any amount of tax reduction already allocated to a particular tax year in respect of that earlier gift of pre-eminent property is applied in priority to any tax reduction allocated to the same tax year in respect of the later gift. The individual is not required to use the whole of the tax reduction available, for example where the value of the gift is very high and/or the individual knows that their tax liabilities will not be sufficiently large so as to be able to use the full amount of the tax reduction.
7.Paragraph 4(6) of the Schedule provides that HM Treasury may, by order, amend the rate of the tax reduction, as set out in paragraph 4(5).
8.Paragraph 5 of the Schedule enables the individual to specify how the tax reduction is to be split between their income tax and capital gains tax liabilities.  If the individual does not express any preference, the tax reduction will be applied first to the individual’s income tax liability and thereafter to any capital gains tax liability.
9.Paragraph 6 of the Schedule makes clear that where an offer of a gift is accepted under the scheme, resulting in an amount of the tax liability being treated as having been satisfied as provided for in paragraphs 3 and 4, then no late payment interest or late payment penalties will be payable on that amount from the date of registration. Paragraph 6(5) specifies that where there are multiple due dates for a tax year, the deemed payment should be allocated to due amounts in a manner that minimises any late payment interest and penalties due. Paragraph 6(7) makes it clear that late payment interest and late payment penalties that accrue before the registration date are not affected by anything in these provisions.
10.Paragraph 7 of the Schedule provides that, where the donor’s tax liability for a year subsequently changes, the portion of that tax liability for a relevant tax year (to which the tax reduction has applied) is to be recalculated.  In many cases, the effect of this provision is limited.  Paragraph 7(2) makes plain that the schedule of set off of the tax reduction (as contained in the agreed terms) cannot be revised once agreed, even if the donor’s circumstances subsequently change.
	Example, a donor (Alan) had originally allocated a tax reduction figure of £100,000 to Year 3. A’s tax liability for Year 3 was initially found to be £75,000, in which case Alan would have £25,000 of tax reduction figure which could be not be utilised. However, if Alan’s tax liability were subsequently revised and found instead to be £150,000, Alan could then apply the initially unused balance of £25,000 of the tax reduction figure to set against a part of the additional £75,000 liability which had become due after the revision of Alan’s tax liability occurred. The unused tax reduction would be available to set against tax liabilities only; penalties or interest due as a result of an enquiry into the person’s tax affairs for that year would be payable in full.
11.Paragraph 8 of the Schedule makes provision for the tax reduction to be withdrawn where the qualifying gift is set aside or declared void, for example by order of a Court.  Where the tax reduction has already been used, an amount representing the tax reduction (together with any late payment penalties and interest) due up to and including the date of payment, is payable within 30 days of the date the gift was set aside or declared void.  Where the tax reduction has not yet taken effect, the normal due dates for the payment of the tax will apply.
12.Paragraph 9 of the Schedule specifies that the provisions in Part 3 of the Schedule apply to the corporation tax liabilities of company donors.
13.Paragraph 10 of the Schedule provides that the tax reduction is to be applied to the accounting period in which the offer is registered.  The date on which the corporation tax is treated as being satisfied is the date on which the tax liability became due (or, if the liability was due before the offer of gift was registered, the date on which the offer was registered).
14.Paragraph 11 of the Schedule specifies that the amount of the tax reduction for a gift under the scheme by a company is 20 per cent of the value of the property forming the gift.  The company may choose to accept a lower percentage if it wishes, for example where the value of the gift is very high or the company’s tax liability for that particular accounting period will not be sufficient to use the full amount of the tax deduction.
15.Paragraph 12 of the Schedule makes clear that where an offer of a gift is accepted under the scheme, resulting in an amount of the tax liability being treated as having been satisfied as provided for in paragraphs 10 and 11, then no interest or late payment penalties will be payable on that amount from the date of registration. Paragraph 12(5) specifies that where there are multiple due dates for an accounting period, the deemed payment should be allocated to due amounts in a manner that minimises any late payment interest and penalties due. Paragraph 12(7) makes it clear that late payment interest and penalties that accrue before the registration date are not affected by anything in these provisions.
16.Paragraph 13 of the Schedule allows the tax liability for the relevant accounting period to be recalculated where the company’s corporation tax liability for the accounting period subsequently changes.  The effect of this provision is limited.
	Example, B Ltd had a tax reduction due of £100,000. B Ltd’s corporation tax liability for the relevant accounting period was only £75,000 and so B Ltd was not able to utilised £25,000 of its tax reduction. B Ltd’s corporation tax liabilities for the year were subsequently revised to £95,000. B Ltd could therefore use £20,000 of the unused balance of £25,000 to set against the additional £20,000 liability.  The unused tax reduction would be available to set against tax liabilities only; penalties or interest due as a result of an enquiry into the company’s tax affairs for that accounting period would be payable in full.
17.Paragraph 14 of the Schedule makes provision for the tax reduction to be withdrawn where the qualifying gift is set aside or declared void, for example by order of a Court.  Where the tax reduction has already been used, an amount representing the tax reduction (together with any late payment penalties and interest) due up to and including the date of payment, is payable within 30 days of the date the gift was set aside or declared void.  Where the tax reduction has not yet taken effect, the normal due dates for the payment of the tax will apply.
18.Part 4 of the Schedule makes a number of general provisions.
19.Paragraph 15 provides that an order amending the percentage of a tax reduction is to be made by statutory instrument using the negative procedure.
20.Paragraph 16 of the Schedule defines the property that may be gifted under the terms of the scheme.  The definition is intended to the mirror the definition which applies for the Acceptance in Lieu scheme under section 230 of the Inheritance Act 1984, with the exception of land and buildings.  In practice objects or collections of objects may be pre-eminent  if they have an especially close association with our history and national life; or are of especial artistic or art-historical interest; or are of especial importance for the study of some particular form of art, learning or history; or have an especially close association with a particular historic setting.  The decision as to whether an object is pre-eminent rests with the “relevant Minister”.
21.Paragraph 17 of the Schedule defines the term “relevant Minister”.  The relevant Minister is the Secretary of State for Culture, Media and Sport unless the item, defined as an object or collection of objects, has an interest with one of Scotland, Northern Ireland or Wales.  Two levels of interest are defined:
	An item has purely Scottish, Northern Irish or Welsh interest where it is already located in that country and the donor has not expressed a preference for the item to be displayed in a different country of the UK.  In such a case the relevant Minister is the Minister of that country.
	An item may have some Scottish, Northern Irish or Welsh interest if it is located in that country or the owner would prefer the item to be displayed in that country.  In such a case the relevant Minister is the Minister of that home country and the Secretary of State for Culture Media and Sport concurrently.
22.Paragraph 18 of the Schedule defines a number of terms used in the Schedule.
23.Paragraph 19 of the Schedule makes plain that there is no obligation for an offer of a gift under the scheme to be accepted, even if it meets all of the qualifying circumstances pursuant to the scheme.
24.Paragraphs 21 provides for exemption from inheritance tax of a gift of property under the scheme.
25.Paragraph 22 of the Schedule amends the inheritance tax rules where the donor of the object under the scheme had received it in a potentially exempt transfer (PET).  It ensures that there is no chargeable transfer if the person from whom the donor received the object dies within 7 years of the PET.
26.Paragraphs 23 and 24 of the Schedule exempt a gift of a conditionally exempt object from inheritance tax recapture charges.  Paragraph 23(3) inserts new sections 32(4A) and (4B) into Inheritance Tax Act 1984 (IHTA).
27.New sections 32(4A)(a) and (4B) of IHTA ensure that, where a donor gives a conditionally exempt object under the scheme, the gift will not be a chargeable event which would otherwise result in the inheritance tax held over on the object to become payable.
28.New sections 32(4A)(b) and (4B) of IHTA apply where a person inherits a conditionally exempt object on the death of its previous owner. That person may give that object to the nation under the scheme within 3 years of the previous owner’s death without triggering the inheritance tax recapture charge that would otherwise have become due on the death of the previous owner and without any need to renew its conditional exemption.  It also confirms that that person’s later death would not itself occasion such a recapture charge.
29.Paragraph 24(2) of the Schedule similarly inserts new sections 32A(5A) and (5B) into IHTA in relation to gifts to the nation under the scheme of objects conditionally exempt from inheritance tax because of their historical association with an outstanding building.
30.Paragraph 24(4) of the Schedule inserts new section 32A(7A) into  IHTA. This provision confirms that the later death of the person who made the gift under the scheme would not itself occasion such a recapture charge.
31.Paragraphs 25 and 26 of the Schedule make consequential amendments to sections 33 and 34 IHTA.
32.Paragraph 27 of the Schedule inserts new section 258(1A) into section 258 of the Taxation of Chargeable Gains Act 1992 (TCGA).  New section 258(1A) exempts the donor of an object under this scheme from capital gains tax or corporation tax on a chargeable gain, which would normally arise on the disposal of a chargeable asset.
33.Paragraph 28 of the Schedule applies to non-domiciled and/or not ordinarily UK resident donors who use the remittance basis of tax.  Normally, a tax charge is triggered when property derived from untaxed foreign income or gains is brought to the UK, subject to a number of limited exemptions.  Paragraph 28(3) inserts new section 809YD into the Income Tax Act 2007 which ensures that, where such property has been brought into the UK and has been accepted under the scheme, there will be no charge to income tax or capital gains tax on the remittance of that property.
34.Paragraph 29 of the Schedule provides for the scheme to commence on an appointed day by order of the Treasury.  The first tax period to which the scheme may apply is the tax year beginning on 6 April 2012.