The law should be changed to ensure that artwork looted by the Nazis and now held by national museums and galleries is returned to its rightful owners, an MP has said.

Restrictions covering national museums prevent works being returned to the heirs of the original owners. Instead, once ownership is proved, compensation is offered. But Andrew Dismore, Labour MP for Hendon, hopes clauses in the Heritage Bill, due to come before Parliament later this year, can be used to close the loophole.

He said: "The owner of an artwork identified as stolen by the Nazis ought to have the right to decide whether they wish for it to be returned or to have compensation: it should be their choice. While the panel has been successful in identifying stolen works, and there has been some restitution, it has not worked as satisfactorily as it could."

Mr Dismore has also asked Culture Secretary Andy Burnham to reveal which UK institutions have returned looted art.