The Acceptance in Lieu provisions empower the Commissioners of Inland Revenue to accept certain property in whole or part satisfaction of inheritance tax.
As a result of today's decision, an important abstract painting - Composition B with Red by Piet Mondrian - has been permanently allocated to the Tate Gallery.
The painting was acquired for the Tate under a hybrid arrangement. When it was offered, the 'special price' - the amount calculated for the purposes of the tax it may settle - exceeded the offeror's tax liabilities.
In return for the offeror including a condition that the painting be passed to the Tate Gallery on acceptance, the Tate proposed to refund the difference between the amount of tax the painting was eligible to settle and the amount of tax settled by acceptance of the offer.
Financial support was also given from the Heritage Lottery Fund, the National Art Collections Fund and the Friends of the Tate Gallery.
Under the arrangements announced in the Spring Budget 1998, no acceptances in lieu require expenditure by the department. The news follows an announcement by the Treasury that Whitehall will crack down on owners of heritage assets who block access to the public but still claim inheritance tax relief.
Culture Secretary Chris Smith said: 'This work is a fine example of a Mondrian 'double-line' painting. Although currently on display at Tate Millbank it will be an important and appropriate addition at Tate Modern when it opens in May next year.'
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