Heritage property ― loss of conditional exemption

By Tolley in association with William Hadley at Boodle Hatfield LLP
Trust_tax_img

The following Trusts and Inheritance Tax guidance note by Tolley in association with William Hadley at Boodle Hatfield LLP provides comprehensive and up to date tax information covering:

  • Heritage property ― loss of conditional exemption
  • Introduction
  • Chargeable events
  • The tax consequences of a chargeable event occurring
  • Settled heritage property
  • Capital gains tax (CGT) and conditionally exempt property

Introduction

Where a chargeable event occurs in relation to conditionally exempted property, the exemption may be lost and an inheritance tax charge may arise. For information on the conditional exemption, see the Heritage property ― conditional exemption guidance note.

Chargeable events

Chargeable events may consist of:

  • a material breach of an undertaking (IHTA 1984, s 32(2))
  • a disposal of the heritage property (IHTA 1984, s 32(3)(a))
  • the death of the person beneficially entitled to the property (IHTA 1984, s 32(3)(b))

Where a breach of an undertaking has occurred, in practice HMRC will usually give the taxpayer an opportunity to remedy the breach where possible. If there has been lengthy period of no public access, this may not be possible. Note that a failure to observe an undertaking, as varied by a proposal by HMRC and directed to take effect by the Tribunal, also amounts to a material breach of an undertaking.

IHTM04117

The meaning of ‘disposal’ is usually quite straightforward. Note that HMRC states mortgages and leases are not disposals but they could undermine the integrity of the mortgagor’s or lessor’s interest to such an extent that they do amount to a material breach of an undertaking.

The lifetime disposal of a chattel by sale, gift or otherwise will amount to a chargeable event unless the disposal is:

  • to an exempt body within IHTA 1984, Sch 3 (eg museums, galleries, etc) (IHTA 1984, s 32(4)(a))
  • to HMRC in lieu of tax under IHTA 1984, s 230 (IHTA 1984, s 32(4)(b))
  • itself a c

More on IHT reliefs: