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Preserve it and save: how conditional exemption can protect your heritage... and your wallet
Charles Richardson
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.
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:
The relief is conditional - the tax is deferred, not eliminated. If the undertakings are breached, the deferred tax becomes immediately payable.
The scope of qualifying assets is broad, but the eligibility threshold is high. The legislation outlines three principal categories:
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.
Failure to meet the undertakings—such as inadequate maintenance or insufficient public access—can result in:
HMRC conducts periodic reviews to ensure compliance.
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.
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.
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.
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.
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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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
Or call +44 (0)20 7814 1200
Charles Richardson
Charles Richardson
James Ward
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