Spring Newsletter

We hope this newsletter is a welcome relief from the diet of doom, gloom and working from home.

Here is a tasting menu, with Spring on its way, while we, newly named, Art Market Professionals (AMPs) get to grips with the 5th Anti Money Laundering regime in the UK.

When we started writing this newsletter Covid-19 was not really an issue. Coronavirus, which h
as inexplicably led to a near collapse in sales of Corona beer, has also meant many auction sales have been postponed or cancelled. However, loses at auction will perhaps only make private sales more attractive although with some major US institutions not travelling to TEFAF, not all aspects of the private market will feel so optimistic.

Then there was the budget, which appears to have left the capital taxation of art effectively unchanged. At the outset, we decided against a piece on art financing, as outside the US there is a lot more talk than action. Having said that we note the new CEO of Sotheby’s, Charles F. Stewart, included art financing as one area to focus on – we assume this means guarantees, which we have written about – see Autumn 2017 newsletter. His focal points are worth mentioning: Asia, financing, private sales, digital growth but most important, the use of their data. No mention of auction.

On the basis of show and tell rather than presenting information here goes.

Collection Management – is going paperless the answer?

A long-standing client of ours got in touch when it turned out that a major UK institution had lost track, for a year, of the fact that his loans and therefore the Government backed insurance had lapsed.

Most clients with large, complicated and mobile collections find it difficult to keep up with their constantly changing natures and find paper based static valuations don’t really help.  Trustees feel this concern acutely and know they are in the firing line. What can be done? It was not just when loans expire that our client wanted to know about but: current and previous valuations and from who, all the cataloguing information available, purchase details, provenance, images, exact ownership, taxation status, exhibitions with full information, obligations, import/export documents, current and previous location and conservation reports etc.We introduced our client to the online system that we use which is wholly independent and secure. All the above can be stored, updated and changed.  Access is interactive and simple. Much greater amounts of information can be stored than with a valuation. The site is easy to maintain and produce analysis and reports from. Amazingly, the site is not expensive – in the region of $100 a month.

Acceptance in Lieu of Inheritance Tax (AIL) – UK Heritage Regime

One complaint against the AIL scheme is that valuation is pegged to auction and this can make the tax break of 25% of the Inheritance Tax (IHT) due not worth accepting. However, there are objects and collections of objects that may be more highly prized through the AIL scheme than through the rest of the market.

We recently handled a very large collection of Toy Theatres put together by a well-known actor. Toy Theatres were at the height of their popularity in Britain in the 19th Century when children would put on performances for their families in the days before before television – continental Toy Theatre tended to be to a public audience and the theatres were bigger and grander. The commercial market for Toy Theatres is very small and one of the best buyers was now a seller and our client.

Through the AIL scheme we agreed a value many times in excess of the auction estimates and kept the collection together which is now shared, principally, between the Victoria & Albert Museum and the Bristol Theatre Collection.

AIL can also work very well for archives, collections and other works of art where art historical or cultural issues mean more to an institution than a collector.

Look at Maria Helena Vieira da Silva, THE TILED ROOMoil on canvas, 60.4 x 91.3 cms, which is now in the Tate. Da Silva was one of the few female artists in the School of Paris, the condition issues were not a problem for the Tate (they have a fantastic conservation dept) and this very early painting clearly envisaged her mature style. The AIL value, in this case, was a number of multiples of the non-institutional market and we were able to agree a hybrid arrangement where the Tate raised additional cash over the IHT liability settled by the AIL. A win/win as they say.

UK Chattel Fiscal Forum – 16th March 2020 

These annual gatherings allow HMRC and practitioners to discuss art issues. The minutes are useful for others to review and we have asked HMRC that this year’s agenda includes a discussion of the status of these meetings and their minutes with the aim of making the minutes more informative.

This has been postponed.

Swings and Roundabouts – London Evening sales in February 2020

Sotheby’s rose high in the Post War & Contemporary Evening format whereas Christies had a quieter evening. The week before it was all Christies in the Impressionist Modern category.

Looking at the Post War & Contemporary sales we thought it was interesting that smaller-newer-artist lots had significant bidding at both houses whereas there was just one bid for David Hockney, THE SPLASH which sold to one bidder for £23,100,000 (including buyers premium) from an estimate of £20,000,000 – 30,000,000. As you might have guessed THE SPLASH was subject to a third-party guarantee.

2020 Budget and Proposals for Capital Taxation

Although we don’t give tax or legal advice we are aware of two proposals put forward to review capital taxation.

The Office of Tax Simplification (OTS) which looked at: lifetime gifts; IHT and CGT; and Businesses and Farms.  Then there is the All Party Parliamentary Group which is much more radical and suggests the abolition of the PET regime, existing reliefs and a flat rate of Inheritance Tax amongst other things.

5th Anti Money Laundering Regime (AML)

Leaving the best until last, the AML regime came into force on 10th January 2020 and a few weeks later we got 111 pages of British Art Market Federation guidance.  The requirement on AMPs, as we are now known, to verify the identity of your client, the identity of the buyer, the nature of the transaction and provenance of object is clear.

What is less clear is how sellers are meant to find out the identity of the buyers where there is an intermediary. At auction, it appears that a seller can take benefit of the auction house’s AML checks. If the transaction is a private one, the intermediary will not want to reveal their client, as this is a closely guarded business relationship. We have already had requests from intermediaries that we should rely on their AML checks and not reveal the identity of the buyer.

On the other side of the coin, auction house already require information on the selling client and the international houses are at pains to point out that this will not go to the sale departments. There are, of course, many houses that don’t have compliance departments.

A final conundrum, worth pointing out, is when to report a client to the National Crime Agency (NCA) for suspicious behaviour. It is possible to get clearance from the NCA but if they decide to investigate the client we, as AMPs, are not allowed to alert the client for over 200 days when we must cease acting but not in such a way as to alert the client!


Whatever the shape of Sotheby’s after Charles F. Stewart is finished we were struck that harvesting data is set to top the list of income production whatever that actually means for clients.

For the right collection, an online collection management system is a great idea and trustees have a platform to monitor what they are legally responsible for.

An AIL can produce a win/win scenario for the right object although it’s difficult to decide whether to use AIL with auction estimates alone.

Before the AML regime, it was our standard practice to ensure that an object was offered with good marketable title and it was exchanged for vetted funds via a private sale. We welcome the AML regime but wonder how the intermediaries will cope with disclosure.  It seems that some form of reliance might be the solution but AMPs remain liable regardless and must make a risk based assessment of whether to rely.

Sadly, TEFAF had to close early adding to their woes.  The lock down has led to most auction sales (other than online ones) being shelved. Although museums may be low on staff or shut to the public, collectors will still be active and so much of the private market will continue we hope.  Planning and Collection Management can proceed as normal.

In an effort to remain cheerful, let’s hope the next virus is named: Lafite or Margaux.

Copyright © 2020 Cochrane Adams Fine Art AgentsAll rights reserved.


Charles Cochrane: charles@cochrane-adams.com

Mark Adams: mark@cochrane-adams.com

Our mailing address is:
Cochrane Adams Fine Art Agents
21 Eastcastle Street London,
United Kingdom       Tel:02030955120