Heritage Assets: IHT and CGT relief

What is the Conditional Exemption Tax Incentive Scheme? What taxes does it apply to? What are the conditions?

This is a freeview 'At a glance' guide to the Conditional Exemption Tax Incentive Scheme.

At a glance

Under the terms of the Conditional Exemption Tax Incentive Scheme, certain buildings, land, works of art and other objects are given special capital tax status to preserve and protect national heritage for the benefit of the public.

Assets that qualify under the scheme are exempt from Inheritance Tax (IHT) and Capital Gains Tax (CGT) as long as certain conditions are met.

• The owners of buildings of historic or architectural interest, land of historic, scenic or scientific interest, and objects and collections of national, artistic, historic or scientific interest are given favourable tax treatment, for IHT and CGT and in return they care for and retain those assets for the benefit of the nation; this includes keeping them in the UK, displaying them to the public, and allowing the public access.
• Where this is no longer possible owners are encouraged to dispose of the assets to bodies in this country which have been set up specifically to hold such property in trust for the public.
• Certain tax reliefs are available for such disposals although in general disposal will lose the underlying tax relief, i.e. IHT relief could be clawed back.

Overview 

In 2018, HMRC updated their memorandum on capital taxation and the National Heritage for the first time since 1987. Written from an IHT perspective it describes the available capital tax exemptions and reliefs and procedures available for Conditionally Exempt (CE) or otherwise referred to as Heritage Assets.

Various changes have been made since 1987, the most significant were those enacted under FA 1998 to extend public access rights and to publish the terms of undertakings. Other changes include the following:

• The repeal in 1998 of s.26 IHTA 1984 (gifts for public benefit).
• The introduction in 1998 of a two-year period within which to claim conditional exemption and directions for maintenance funds.
• Changes introduced in 2006 to the method of charging tax following conditional exemption from a ten-yearly charge on settled property.
• Provision in 2008 for delegated legislation for giving statutory effect to erstwhile extra-statutory concessions (ESCs).
• SI 2009 No 730 contains three instances where certain foreign-owned works of art etc are excluded property for IHT (cf the former ESC F7).
• Decorations awarded for valour are excluded property for IHT (cf the former ESC F19).
• CGT was not charged on certain disposals of CE property by private treaty to a Schedule 3 body or in lieu of IHT (this was secured under an unnumbered concession.)
• The new legislation is contained in s.258 TCGA and makes provision for disposals by companies.

Qualifying heritage property

Qualifying national heritage property “Designation” is available under s.31(1) for six categories of property:

• Any relevant object which appears to be pre-eminent for its national, scientific, historic or artistic interest, or any collection or group of relevant objects which, taken as a whole, appears to be pre-eminent for its national, scientific, historic or artistic interest.
• Any land which is of outstanding scenic or historic or scientific interest.
• Any building for the preservation of which special steps should be taken by reason of its outstanding historic or architectural interest.
• Any area of land which is essential for the protection of the character and amenities of such a building as is mentioned above.
• Any object which is historically associated with such a building as is mentioned above.

Public access

Broadly speaking, public access to CE objects should be available without a prior appointment on at least a certain number of days each year. Outside this 'open access' period, viewing can be restricted to occasions where a prior appointment has been made. In some cases, viewing may be at a public museum or gallery.

For access by appointment, a person should normally be allowed access as soon as is reasonably practical:

• On the day desired, from a choice of at least 3 weekdays and 2 Saturdays or Sundays within 4 weeks of the request.
• At a time between 10am and 4pm.

Editorial comment

It seems that few people try and see some of the objects. On a practical level, it is very difficult to gain access to some of the assets. Access in most cases is handled by private client law firms and the links given to open days can be uninformative. Be prepared to be ruthlessly persistent if you wish to see an object or a collection.

Coronavirus measures

It may not have been possible for owners of heritage assets in the Conditional Exemption Tax Incentive Scheme to meet all their undertakings due to Coronavirus. HMRC issued guidance in May 2020 to confirm that:

• Where properties could not be opened or access could not be given to assets due to social distancing issues, this would not cause owners to break their tax agreement with HMRC.
• When government advice changed, HMRC would expect the property to be open later in the year to make up for any lost days, if possible.

HMRC's guidance was further updated in June and December 2021 to confirm that: 

• From 1 August 2021, HMRC would not consider agreements broken where reasonable public access could not be provided when following guidance on social distancing.
  • Temporary adjustments to agreements would be considered on an individual basis, such as limiting visitor numbers or closing rooms until 31 March 2022.
• Where a property would normally be open to the public before 1 April 2022, HMRC would not consider an agreement broken if the property is not open for the full number of days required under the agreement.

The temporary rules surrounding the closing or delayed opening of properties due to Coronavirus ceased on 1 April 2022. 

External links

HMRC:

• HMRC Heritage assets  
• Tax relief for national heritage assets
• Search by object type then county location
• Search by region and collection

For help with heritage assets or help and advice on heritage relief, or if you have difficulty getting access to tax-exempt heritage assets, contact the HMRC Inheritance Tax Heritage Team.

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