The purchaser must be a body listed in Schedule 3 of the Inheritance Tax Act 1984 – this includes most public museums, galleries and archives in the UK. These sales offer prices which are beneficial to both the public purchaser and private vendor. They are known as Private Treaty Sales.
For example: when an item that has been granted conditional exemption from Inheritance Tax (which would have been payable at 40 per cent) is sold to a Schedule 3 body, the purchaser will usually only pay about 70 per cent of the agreed open market value. So an item valued at £100,000 can be acquired for £70,000.
This is possible under an arrangement called the 'douceur', where the fiscal benefit of the exemption is shared between the vendor (usually 25 per cent) and the purchaser (usually 75 per cent). So the vendor typically obtains a sweetener of 25 per cent and the purchase price is reduced by 75 per cent of the tax that would otherwise have been payable.
Read our detailed guidance below to find out more about how sales work (including financial examples) and which organisations can purchase items.