Trusts and Inheritance Tax

Heritage property ― conditional exemption

Produced by Tolley in association with William Hadley at Boodle Hatfield LLP
  • 27 Oct 2021 19:01

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

  • Heritage property ― conditional exemption
  • Introduction to heritage property
  • Outline of conditional exemption
  • Land and buildings qualifying for conditional exemption
  • Chattels qualifying for conditional exemption
  • Undertakings
  • Undertakings in relation to land
  • Undertakings in relation to buildings
  • Undertakings in relation to chattels
  • Monitoring of undertakings
  • More...

Heritage property ― conditional exemption

Introduction to heritage property

The preservation and public enjoyment of national heritage property has been supported by tax policies of governments since Finance Act 1896. In return for opening up his heritage property to the public (and preserving it), the owner may receive favourable IHT and CGT treatment with respect to that heritage property. Principally, these benefits take the form of conditional exemption from inheritance tax under IHTA 1984, ss 30–35A (with associated relief from CGT under TCGA 1992, s 258, see below).

Practical guidance in relation to the capital taxation of heritage property can be found in HMRC’s booklet Capital taxation and the national heritage to which references are made throughout this note.

Conditional exemption is only a deferral of tax and therefore is not as advantageous as some other reliefs such as business property relief on a stately home which opens to the public as a business. Conditional exemption is also less popular now than it used to be for two reasons. Firstly, since 1986, there has been the opportunity to make potentially exempt transfers. Secondly, after 1998, the public access requirement became stricter and exemption for chattels in their own right was limited to those which are classed as pre-eminent.

However, there will be occasions where a potentially exempt transfer is not feasible and other reliefs are not available. Conditional exemption may still therefore be an option for heritage property owners to consider.

This guidance note considers the designation of heritage property as conditionally exempt property and the undertakings required. The Heritage property ― loss of conditional exemption guidance note considers what chargeable events may end the conditional exemption and trigger a charge to IHT. It also considers settled heritage property and capital gains tax. The Heritage property strategies guidance note considers heritage maintenance funds (which an owner may establish in order to support conditionally exempt property) and alternative options for owners who have decided that they need or want to dispose

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