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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Assessing: calculations: recapture charges: calculating tax on cessation of conditional exemption

Heritage will advise how to calculate the chargeable event, when conditional exemption comes to an end.

Tax is charged on the net value of the assets disposed of. If the disposal was a sale for full consideration, take the net sale proceeds.

The deductions you can allow are:

  • the costs of the sale/disposal
  • Capital Gains Tax on this disposal


Generally, where the relevant person is deceased and the conditionally exempt transfer took place on their death or a lifetime transfer you should,

  • Add the net value of the disposal to the last calculated value of the death estate to arrive at the revised aggregate chargeable transfer.
  • Recalculate the death estate tax, applying the Inheritance Tax nil rate band that was in place at the date of the disposal.
  • Deduct any tax previously paid on the estate.

Charge interest (IHTM31511) from the day after the due date (IHTM30155).

The rate of tax is:

  • 20% - if the original transfer giving rise to the exemption was a lifetime transfer chargeable when made (IHTM04067), or
  • 40% - in all other cases.

Lifetime transfers

Where the relevant person is alive and the property disposed of was not settled, charge the disposal as an immediately chargeable transfer (IHTM31450).

Settled property

You can find further guidance where the Heritage property is held in a Discretionary Settlement, at IHTM42650.

Complicated cases

Where the usual procedure is not appropriate, you should liaise with Heritage about any aspects of which you are unclear.