Masterpieces by Reynolds, Gainsborough and Rembrandt are among treasures saved for the nation this year by owners exchanging art for inheritance tax.

The scheme, under which people donate works of art in lieu of death duties, provides the biggest annual boost to public collections.

This year’s donations were announced yesterday amid calls for the scheme to be extended so that donors can take advantage of it during their lifetimes. The Museums, Libraries and Archives Council, the Government’s advisory body, recommends the introduction of such tax incentives to stem the flow of treasures leaving Britain.

Owners of valuable works would have inheritance tax demands discounted when they donated them, in their lifetime, in lieu of cash. The works would be saved for the nation, with public access guaranteed for ever.

This year, under the acceptance in lieu (AIL) scheme, which is administered by the council on behalf of the Government, paintings, historic papers,Mozart scores and a diamond tiara have come into public ownership.

There were 32 separate transfers to collections from Plymouth to Glasgow. They were valued at £25.3 million, writing off £13.8 million in tax. The rate normally represents 70 per cent of the work’s value.

The value of objects acquired this year exceeds the combined purchase grants of all the country’s museums and galleries. The British Museum, for example, has only £100,000 to spend on acquisitions. In the past ten years the AIL scheme has acquired items valued at more than £250 million.

With the ever increasing prices realised on the open market – a painting by Raphael soared to £18.5 million this month, breaking the £5.3 million record set in 1996 – museums and galleries cannot compete.

Jonathan Scott, chairman of the AIL panel, said yesterday that the proposal to extend the scheme to owners’ lifetimes should be examined with urgency. Referring to Titian’s Portrait of a Young Man and other paintings lent to the National Gallery, which could soon be sold, he said that at no time within living memory had so many of the nation’s “first XI” masterpieces in private ownership been on the transfer list for offer to overseas buyers. “The panel urges the Secretary of State [for Culture] to review the matter with the Treasury before it is too late,” he said.

He suggested that if the creators of new wealth were to be encouraged to fill the funding gap on behalf of Britain’s national institutions, their generosity needed to be stimulated by tax concessions, and, as they were generally too young to be concerned with inheritance tax, concessions should be aimed at income and capital gains.

Mark Wood, the chairman of the museums council, called for “the kind of incentives which have proved successful in many other countries”. Since 2003, for example, France has offered 90 per cent tax remission for companies that give money to acquire national treasures, while private philanthropists get 67 per cent relief on donations.

The latest AIL report shows that the ownership of as many as 14 paintings by Reynolds has been transferred to Plymouth City Museum and Art Gallery, settling tax bills of £2,154,339. The scheme’s advisers are generally keen to keep objects in their original home and the public will be able to see them at Port Eliot, Cornwall, an 18th-century house partially remodelled by Sir John Soane in a romantic landscape designed by Humphrey Repton.

There has been criticism in the past of works remaining in buildings to which the public had limited access. But as a result of a new agreement, a beautiful house in a magnificent setting, which has never been open to the public, is guaranteed to open for 100 days a year. Important archival material acquired under the scheme includes the papers of the “father” of inheritance tax, Sir William Harcourt (1827–1904), Chancellor of the Exchequer under Lord Rosebery, and his son Louis, Colonial Secretary in Asquith’s Government, whose voluminous diary includes an entry in which he recorded a deathbed confession that Queen Victoria had secretly married John Brown. The collection, which settled a £1,488,140 tax bill, is expected to go to the Bodleian Library, Oxford.

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