Haig comments on the increasing level of interest and the challenges that investors may face:"The more any asset class moves up in value – art, fine wine, classic cars – and hits the headlines, the more calls we get about it. There's certainly more awareness now of these asset classes.
"If you're investing in the stockmarket, you can look at the underlying company and its cash flow, but art is very much a matter of taste. I would agree that art is more for enjoyment than investment. That said, consulting with professionals can help buyers to make decisions with their eyes wide open."
Tom Duguid calls attention to the importance of careful consideration and seeking independent expert advice when investing in this field, stating"Quite a lot of care should be taken over this. You cannot necessarily rely on what an auction house or private dealer tells you about the provenance of a work of art, given that their primary duty is to themselves or their own client as a seller.
"Beyond that, you should be carrying out the usual legal due diligence checks on the seller, whether they own the work, and how they acquired it.
"It is also important that you keep any paper work involved when you buy the work in the first place. For older works of art, and certainly anything pre-1945, you would want to check ownership to see if it might be subject to any claims subject to misappropriation during the Second and even First World War."
Tom goes on to discuss the tax and succession issues, such as capital gains tax, that are often overlooked when purchasing art and collectibles:"If you intend to gift it on to another family member, you must consider the CGT implications at that point.
"After annual exemptions for CGT (£10,600 currently), CGT on profits from a subsequent sale of the art would be 18 per cent or 28 per cent in the case of a higher rate tax-payer."
Tom also discusses the tax relief in place to encourage privately held"pre-eminent" works to become viewable by the public, saying"Usually, there's a 25 per cent increase on the valuation of the work in terms of how it is set against your tax liability. The owner of the art wins through this sweetener. The government and the public win through being able to acquire a work of art that they might not otherwise have been able to, and often at a lower amount than might have been expected."
Tom comments on the similar arrangement that has recently been introduced for lifetime gifts of works of art to national museums and galleries, which offers income relief based on the value of the work being gifted: "It's very new and we don't know what the uptake will be, but it's expected to encourage wealthy individuals to make collections available for viewing, and modern art in particular.
"The Revenue's heritage section is very clued-up on these issues, it's used to doing it, and you can usually get these arrangements done fairly quickly. We're doing an acceptance in lieu arrangement for a client at the moment and it's progressing well even though it has some slightly unusual elements to it."
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This content was generated prior to Turcan Connell Asset Management Limited operating as Tcam.