Heritage property strategies

By Tolley in association with William Hadley at Boodle Hatfield LLP

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 strategies
  • Maintenance funds
  • Qualifying property and property suitable for the maintenance fund
  • Maintenance fund assets
  • Disposals to public charities and Schedule 3 bodies and private treaty sales to Schedule 3 bodies
  • Acceptance by HMRC in lieu of tax

Where an owner has claimed, or is considering claiming conditional exemption on heritage property, he may also wish to consider whether or not to establish a heritage maintenance fund; the income and capital of which may be used to support the conditionally exempt heritage property.

If, on the other hand, he decides that he or his descendants can no longer maintain the heritage property, he may consider disposing of the property by gift or sale to a charity or a body listed in IHTA 1984, Sch 3 or, alternately, to HMRC in lieu of tax.

Maintenance funds

As part of the policy to preserve national heritage property, heritage maintenance funds may be established. These settled funds, whose assets (usually not heritage property itself) and income are used for the maintenance of heritage property, receive advantageous IHT treatment.

IHTA 1984, ss 27, 57A, Sch 4, paras 1–7

Transfers of property into a maintenance fund are exempt transfers provided the maintenance fund meets the qualifying conditions set out below.

IHTA 1984, s 27

The property does not rank as relevant property for the purposes of the principal and exit charges under IHTA 1984, ss 64–65.

IHTA 1984, s 58(1)(c)

Although a recapture charge will apply when the trust fund loses its qualifying status, it can be avoided provided that the property reverts to the settlor or is used for alternative heritage purposes.

IHTA 1984, Sch 4, para 8
Qualifying conditions for a maintenance fund

The requirements of the use of capital and income in the maintenance fund are as follows:

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