The tax situation (in some detail).

Since the main reason to write this blog was in order to help anyone who finds themselves in the position that I was placed in, namely an Executor of the Estate of an artist, it's worth me writing at some length about the current situation with regard to Estate Duty. I went back to the early entries of the blog and realised that I never really discussed this in much detail. But now, 18 months on, HM Revenue and Customs are asking us for clarification it's worth saying something about the background and circumstances that has produced this situation. 

a) Dave Pearson asked me to be joint Executor to his will, with a particular role in looking after his artwork, and in that role I supported his son Christopher in negotiating the probate arrangements around the valuation of the artwork left by his father. In Dave's case this was difficult as he simply didn't sell much work during his lifetime, and had not sold anything for several years before his death. Probate, by the way, is a document that enables a person, usually an executor, to deal with someone's estate, between their death and the acceptance in law of the settlement.

I researched and explained the inheritance tax situation as I understood it to Chris, and I made a real effort to seek expert valuation of the artwork. You will appreciate that this was difficult as the artwork in the studio had not been touched for many years and the building itself was in a very poor state of repair, plus the artwork was distributed throughout the building in a chaotic way.

b) Dave's Estate included a studio, various 'chattels' (furniture and such like) and some money in the bank, as well as his artwork. The first things were relatively easy to value, and the total value of these came under the threshold for Dave's estate to need to pay Estate Duty. 

Chris and I  realised the importance of getting the work valued and spent several days on the internet and telephone trying to get expert opinion. Walton and Walton, auctioneers and valuers, of Burnley finally agreed to meet with me and asked me to bring a selection of Dave Pearson's artwork to their salesroom. Their website describes them as offering services for 'Professional Valuations for Probate'. I asked Chris Pearson to come along to this meeting and we had a consultation lasting about half an hour with their expert. He explained the difficulty of valuing the work; and given that there had been no history of sales of Dave Pearson's work for the past 5 years or more we were told that there was no basis to value the work beyond a nominal value. I asked for a written valuation but they declined to provide this, saying again that there was no basis or history on which to base a valuation and repeated their advice to put a nominal value on the artwork, which they felt was a true reflection of the value at the time of Dave Pearson's death.

To be certain about the issue I continued to research this, and spoke with several other valuers over the telephone. None would even meet with me, and the repeated message was that as there was no history of sales of the work for a period of many years, and that as Dave Pearson was not a 'well-known', or even a 'known' artist, any valuation could only be nominal.

c) I passed this information on to Chris Pearson and he met with his own solicitor, and at that point they made a valuation of the artwork portion of the estate in line with the advice that it only had a nominal value. This then became part of the valuation of the Estate.  

d) At that point we set up the Trust and, of course, this blog explains and explores how this was done. Then a few months ago the tabloid press got hold of a story that had started with a local news report - it was along the lines of the artwork being worth a lot of money ('millions' were quoted) and played heavily on the idea that Dave Pearson had been a reclusive eccentric; in other words a modern version of the 'miser's gold' story. Of course all this was very, very far from the truth, but then the press isn't very interested at getting at the truth, and clearly they felt it made a good story as it appeared in several national newspapers.

e) So the current situation with regard to HM Revenue is that they are seeking an explanation as to the gap between a probate valuation, given late in 2008, of Dave Pearson's artwork that is 'nominal' (i.e. probably between £3,000 and £5,000) and press reports in 2010 of the work being worth 'millions'. 

f) The key thing about probate valuation of an estate is that it's the value at the point of death. A subsequent change in value is irrelevant with regard to assessing probate. As anyone following this blog will know the whole point of setting up the Dave Pearson Trust and the work we've undertaken over the past 18 months has been to increase awareness of Dave's legacy and, as a natural development of this, his works have increased in value.  All sales of work since probate have been properly recorded, and in a period of 21 months the Trust has sold just under £50,000 worth of his work. We are completely transparent about this - in fact it's a direct by-product of our aims and objectives.  We met with our solicitor last month to discuss the tax implications of these sales, and that is currently in hand. 

g) Dave Pearson's case is probably unusual although I'm certain that it won't be unique. Clearly anyone undertaking this kind of work has to be very careful to avoid the charge that they had purposely under-valued the work of an artist in order to avoid death duties. In the case of an artist who sells their work on a regular basis this would be relatively easy to prove one way or another. For an artist who hardly sold their work at all it can easily lead to the situation we're currently having to deal with.

The taxman cometh

On return from holiday (hence the gap in these blog entries) I found a letter waiting for me from Woodcocks, our solicitor, and assumed it to be about the meeting we had last month to review the Trusts tax position. In fact events have overtaken us as Chris Pearson has been asked by HM Revenue and Customs to explain the gap between the nominal value inserted in the probate papers against the value reported in the media of Dave's estate. Go back a few months and we had frankly ridiculous and inflated reports in the press about the value of the work.

In the letter details were asked for about any meetings we had with probate valuers regards to valuation of the work that was left on Dave's death, and so on. This will mean going over things that happened two years ago; it's precisely the situation I wanted to avoid by talking with our solicitor last month.

Anyway, I'm certain that we have done all the right things, and correctly. One bonus is that we have this blog - documenting the process and the work we've put in to develop Dave's reputation! 

But anyway,  for now there's another weeks holiday to have and then buckle down to sorting this out and, hopefully, satisfying the tax authorities. 

Taxation!

After our recent meeting I had made an appointment to visit the solicitor who helped us set up the Trust in the first place - Stephen Parr of Woodcocks, Haslingden. We like his clear and straightforward manner.  

The tax position needed clarifying for us. When the Trust was first established there was such a lot of information to take in that, although Stephen outlined the tax situation to us, it seemed a very distant concern at that time. Now, after the Dave Pearson Trust has been selling his work for 18 months, it needed to be looked at in detail and we had to make certain that we were operating correctly. 

Stephen outlined the need to register with the Inland Revenue and the situation with regard to Inheritance Tax, VAT,  Income and Capital Gains Taxes. Margaret and I came out of the meeting pleased that we hadn't left it any later to consult him. We're now waiting for the notes of the meeting to be sent to us by Woodcocks, and then to decide how we'll deal with things as they stand. Fortunately, the situation is easily manageable and the solicitor will be able to deal with any declarations on our behalf. 

Moving along

The Trust - Margaret Mytton, Chris Pearson and I - met last week, and reviewed our position. We confirmed that we would commission a film from Derek Smith; we agreed to visit a solicitor to check on our tax situation and a few other legal questions that have arisen; and we also agreed that we would meet with Julian and Jackie of the See gallery to look at ways we could work more closely together. 

Since then Derek has lost no time, and is currently back in Rossendale conducting a series of interviews with friends, and others who know Dave's work, as a way of working gently into the business of film-making. 

I've continued to sell work, but I'm now extremely aware of the need to keep important pieces back. I've also had a day of cataloguing (i.e. entering pieces into the Artlook catalogue) and we are now approaching having catalogued a thousand pieces. Of course, given Dave's phenomenal productivity, this still only scratches the bottom of the pile. Finally, the catalogue had now been moved onto a Macbook so the whole thing can be easily taken up to the studio for comparisons and in order to make the process of cataloguing generally more efficient. 

A film is commissioned

Two more of the newly discovered slides - a picture of the Potato Eaters (seen in the exhibition shot below), and a close up of their table. 

Yesterday we met to discuss the idea of a film about Dave with Derek Smith, and agreed to commission a film by Derek about Dave's work and, to some extent, his life. 

Derek has recently completed the film "An Exile in Paradise: The Adventures of Edward Lear in Greece and Albania" which won the Arts Silver World Medal at the 2009 New York Festivals International Television Programming and Promotion Awards, and this film has been shown on Sky Arts. The production company's website says 'Derek Smith has made many documentary series for Independent Television and the BBC. He won the first BP Arts Award for a film about Franz Liszt, a clutch of medals at the New York TV and Film Festival and Royal Television Society Awards for his regional work. He has made portraits of figures as diverse as Lucian Freud, John Tavener and The Dalai Lama.' 

Derek came to one of Dave's exhibitions at the See Gallery and then visited the studio. He was immediately excited about the possibilities of a film about Dave and we, in turn, instinctively felt that Derek would be the right person to make such a film.  Our hope is that we will have a finished film, of about an hour in length, ready for release for Easter 2011.

Images from the Van Gogh period

A recently discovered set of slides from the late 1960s/early 1970s shows some of Dave Pearson's work from his Van Gogh period. Nearly all of this work has been lost either through deterioration of the papier-mache, or for lack of storage space. The top photograph above shows 'The Potato Eaters' and part of 'The Blue Reaper' in the foreground, probably at the Bede Gallery in Jarrow. The wall on the right is full of etchings and drypoints from this period and, fortunately, there are examples remaining of most of these. 

The central photograph is probably from the Liverpool Academy exhibition in the same year, 1970. The blue 'Vincents Hat' is visible, with 'Sunflowers' on the right and 'The Blue Reaper' again glimpsed through the doorway. At the bottom there's a close up of 'Vincent and the Blue Easel' from one of these shows  - the figure of Van Gogh being roughly life-size. 

Holding back work...

After the Reveal Open Studios weekend we were expecting a visit yesterday from BBC Radio 4 Front Row, but that got postponed at short notice. Instead Margaret and I met up at 54 and used the opportunity to review where we are with things. 

A lot has been achieved in less than two years, but having rescued the work and the studio many of the the fundamental questions and issues about the Estate remain. In particular how are we going to increase awareness of Dave Pearson's work and get to see it represented more widely in collections? Up to now we have been selling work at what we consider to be low prices in order to raise enough money to sustain our work, but we now have sufficient funds to look after the storage and building for the immediate future as well as commission a film about Dave. 

We started by deciding to put more work aside, to 'ring-fence' it from immediate sales. The criteria will be 

• important pieces in Dave's development; 
• exceptional pieces that would currently be ludicrously under-priced; 
• typical examples from his main series of works, especially those in short supply. 

So, for example we've decided to hold back the remaining 40 self-portraits on canvas. We will also soon look at the relief paintings and some of the series of works on paper. We've already been through this process with the 'In the 7 Woods' pencil series (see above for an example) and held back perhaps 30% of the drawings. We've done it for the large prints too. Eventually we'll do this for all of the work... 

As Trustees of the Estate we have a duty to the mission of the Trust, which is (in short) protecting the work and enhancing Dave Pearson's reputation as an artist. We also have a duty to Chris Pearson who made over the work to the Trust (he remains a Trustee) to manage the sales of the work sensibly, and we recognise that it would be foolish to sell pieces at this stage that may well be significantly more valuable in future. It's all about striking the right balance of course, and we need to get the balance right between getting some income in now and making certain that the legacy is properly protected.