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Preserve it and save: how conditional exemption can protect your heritage... and your wallet

5 September 2025

With significant changes to Inheritance Tax (IHT) reliefs for agricultural and business property due to take effect in approximately seven months, affected individuals are exploring every available planning strategy to mitigate the impact. For those who are asset-rich but cash-poor, the prospect of a 20% IHT charge on death is deeply concerning and threatens the continuity of long-held family assets.
 

The uncomfortable reality is that there is no universally applicable solution. However, the UK’s Conditional Exemption regime offers a compelling—albeit limited—opportunity to defer both IHT and Capital Gains Tax (CGT) in specific circumstances.

What is conditional exemption?
 

Conditional exemption is a relief mechanism under the Inheritance Tax Act 1984, allowing owners of qualifying heritage assets to defer IHT and CGT liabilities upon transfer, provided they agree to specific undertakings. These typically include:

  • Maintaining the asset in good condition.
  • Providing public access for a minimum number of days annually.
  • Retaining the asset within the UK and notifying HMRC of any changes.

The relief is conditional - the tax is deferred, not eliminated. If the undertakings are breached, the deferred tax becomes immediately payable.

What qualifies?
 

The scope of qualifying assets is broad, but the eligibility threshold is high. The legislation outlines three principal categories:

  • Works of art and other objects of national scientific, historic, or artistic interest that are considered pre-eminent.
  • Land of outstanding scenic, historic, or scientific interest, encompassing botanical, horticultural, silvicultural, arboricultural, agricultural, archaeological, physiographic, and ecological features, as well as man-made landscapes.
  • Buildings of outstanding historic or architectural interest, including essential amenity land and historically associated objects.

Eligibility is determined by advisory bodies such as Historic England, Arts Council England, and Natural England. Crucially, it is not sufficient for an asset to be merely “heritage” or “unique” - it must be among the most exceptional of its kind.

Applications must be submitted within two years of the relevant transfer, and successful applicants must enter into formal undertakings with HMRC.

Examples of qualifying assets


Works of art and objects

  • A Turner painting in private ownership, recognised for its artistic and historical importance.
  • 17th-century naval maps, valued for their contribution to national history and scientific understanding.
  • Rare geological specimens, deemed of national scientific interest by expert bodies.

Land of outstanding interest
 

  • Capability Brown-designed gardens on a private estate, representing landscape architecture of national significance.
  • Ancient woodland hosting rare species, with ecological and botanical value.
  • Historic battlefield sites, notable for their archaeological and historic relevance.

Buildings and associated land
 

  • A Grade I listed Jacobean manor house, preserved for its architectural and historic merit.
  • A medieval church retaining original features, reflecting religious and cultural heritage.
  • An estate with historically associated objects, such as antique furniture or archival materials linked to the property.

Why consider conditional exemption?
 

  • Tax deferral: IHT and CGT liabilities are postponed, often indefinitely, provided the undertakings are upheld. Successive owners may renew the undertakings, preserving the exemption across generations.
  • Legacy preservation: Families can retain culturally significant assets without being forced to sell them to meet tax obligations.
  • Public engagement: The scheme promotes public access, enhancing the asset’s visibility and societal value.
  • Estate planning flexibility: Once exempted, assets may be used more freely without triggering IHT anti-avoidance provisions (e.g. gift with reservation of benefit). Owners may also establish a Maintenance Fund, which is itself IHT-exempt, to support the long-term preservation of the asset—offering further favourable tax treatment.

What to watch out for

1. Compliance is essential


Failure to meet the undertakings—such as inadequate maintenance or insufficient public access—can result in:

  • Immediate liability for deferred IHT/CGT.
  • Interest and penalties.
  • Loss of future eligibility.

HMRC conducts periodic reviews to ensure compliance.

2. Restricted flexibility
 

Once an asset is within the regime, its sale or transfer (except to an approved body) may trigger the deferred tax, potentially limiting future planning options.

3. Public access requirements
 

Owners must provide public access for at least 28 days per year, with specified hours and days. This can affect privacy and may necessitate investment in visitor infrastructure, insurance, and health and safety compliance—particularly where access is granted to stately homes or extensive grounds.

Assets held in museums or galleries often meet access requirements more easily, mitigating some of the practical challenges for private owners.

4. Administrative burden
 

HMRC may require a Heritage Management Plan, detailing how the asset will be preserved and accessed. This adds complexity and typically requires professional advice. Ongoing reporting obligations also apply, with HMRC monitoring compliance over time.

Conclusion
 

Conditional exemption is a powerful tool for those seeking to align the preservation of culturally significant assets with prudent tax planning. However, it is not a passive relief - it demands active stewardship, careful structuring, and ongoing compliance.

In a climate of increasing uncertainty around IHT and broader tax reform, Conditional Exemption may offer a valuable buffer - provided the undertakings are acceptable and sustainable.

For owners of heritage assets, the message is clear: preserve it and save. With the right advice and commitment, conditional exemption can help safeguard both your legacy and your financial future.

about the author

Charles is a specialist trusts and estate planning lawyer, and leads the firm's Landed Estates practice. His focus is advising families on their succession and estate planning generally, and his strength lies in the technical aspects of private client work, particularly trust law and capital taxes. He also has specific expertise in guiding the succession and management of Landed Estates, their diverse businesses and structures, including as a trustee himself of a significant Estate.

 

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