National Heritage Conditional Exemption Scheme

The National Heritage Conditional Exemption Scheme (the Scheme)

The Scheme is designed to preserve and protect national heritage for the benefit of the public. Buildings, land, works of art and other objects that qualify under the scheme are exempt from Inheritance Tax (IHT) and Capital Gains Tax (CGT) as long as certain conditions are met.

The scheme is complex but, broadly, when an IHT or CGT charge arises either on death or on a lifetime transfer, a taxpayer wishing to claim the exemption must make an application to HMRC’s Heritage Team providing evidence to show that the asset has (depending on the type of asset in question) outstanding national, scenic, historic, scientific, artistic or architectural interest.  

There usually follows a period of negotiation with HMRC as to whether the asset truly meets the criteria, and if it does so, what conditions HMRC require in order to grant relief from tax. HMRC will typically require undertakings from the new owner (or appropriate other person such as a trustee or custodian) of the heritage asset that they will maintain the asset, preserve its character, keep movable assets in the UK, and permit reasonable public access on an agreed number of days each year.  Public access may include, for instance, opening land or buildings to the public, or placing an item on display at a museum or gallery. Breach of these conditions will result in a tax recapture charge.

The impact of coronavirus

Government social distancing rules introduced to combat COVID-19, including the shut-down of many public venues, has prevented many owners of heritage assets from complying with their undertakings to permit public access. This has the potential to cause great uncertainty for owners seeking to comply with social distancing, but concerned to avoid the potentially disastrous tax consequences that would arise if HMRC levied a recapture charge.

The latest government guidance confirms that owners will not be considered to have breached their undertakings if public access and/or the production of publicity and promotional material is prevented due to social distancing rules. Owners of heritage assets that are accessible to the public only be appointment are not expected to agree to any appointments until government advice changes. Where publicity and promotional material is still published, owners may include a statement that the opening of the property may be subject to change or cancellation, depending on the developing circumstances.

However, the guidance also states that, if government advice changes making public access possible again before the end of 2020, owners will be expected to make up for lost days before the end of the year. Owners should prepare for the possibility of granting (and publishing) public access on new dates, perhaps out of the normal visiting season, potentially on short notice.  

Any questions?

The above is only the very briefest of outlines of what is a complex scheme. In practice, detailed advice is recommended both when claiming relief and at regular intervals thereafter.

The content of this article is for general information only. If you require further information, please contact Tobias Gleed-Owen, Lorna Spear or any other member of the Private Client Advisory Team at Birketts.