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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Household goods and personal goods: valuation and technical issues: conditional exemption

Conditional exemption is given to help ensure that items of national, artistic, historic or scientific interest are conserved and protected for the benefit of the nation as a whole. IHTA84/S30 -35A and 78-79 are designed to encourage the owners of these important items to keep them in private ownership whilst caring for them and displaying them to the public. These provisions enable transfers to be conditionally exempt from IHT as long as:

  • the exemption is claimed within two years (or such longer period as HMRC might allow) after the death or other occasion of charge
  • the property transferred is designated by HMRC as pre-eminent for its national, historic, artistic or scientific interest; and
  • the appropriate person, usually the new owner, gives undertakings to preserve the property, allow reasonable public access and keep it in the UK.

There is a similar exemption from Capital Gains Tax (CGT).

The sequence in connection with a ten-year anniversary of a settlement under IHTA84/S64 is different. Here if conditional exemption is claimed for property (which is not currently the subject of an earlier conditional exemption) the designation and undertakings must be in place before the date of charge.

The exemption is described as conditional because there is normally a tax charge if the undertakings are materially broken. There is also a tax charge, normally, if the property is sold or if it disposed of otherwise than by sale without a replacement undertaking from the transferee.

If you receive any claim for conditional exemption (either within the two year time limit or outside it) or any question on taxation and the national heritage arises, you should refer it to Heritage for advice immediately. You should also refer the matter to Heritage if you learn that any particular chattel included in the estate or subject matter transferred was conditionally exempt from Inheritance Tax, Capital Transfer Tax, Estate Duty or CGT on a previous death or other occasion.

If the taxpayer offers any chattel as payment in lieu of tax (IHTA84/S230-231), please refer the matter to Heritage.