Heritage property strategies

Produced by Tolley in association with William Hadley at Boodle Hatfield LLP

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 strategies
  • Maintenance funds
  • Qualifying conditions for a maintenance fund
  • 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

Heritage property strategies

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.

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

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

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.

Qualifying conditions for a maintenance fund

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

  1. in the first six years after establishing the trust, the fund must only be used for:

    1. the maintenance, repair or preservation of, or making provision for public access to, qualifying heritage property

    2. the maintenance, preservation or improvement of the trust property itself, having regard to the purposes of the trust

    3. the expenses of the trustees in relation to the trust property

      Any income not applied as above may be paid to a qualifying charity or one of the public bodies listed in IHTA 1984, Sch 3.

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