Natural England - What is conditional exemption?

What is conditional exemption?

Capital tax exemption (also known as “inheritance tax exemption” or “heritage relief”) is available for land of outstanding interest in the UK, subject to conditions (undertakings) that require owners to maintain the land, preserve its character and provide and publicise reasonable public access.

Capital tax, presently 40%, is charged when land is transferred to a new owner. Sometimes heritage assets have to be sold or collections of individual assets are broken up to pay the tax. Less money is available to spend on maintenance of the heritage land, which in turn reduces the amount and quality of the nation’s privately owned stock of outstanding land.

If a capital tax charge arises, for example by inheritance or gift (but not sale) of outstanding land, owners can apply to HM Revenue & Customs for conditional exemption of that tax.

If the land meets the appropriate standard HM Revenue & Customs, advised by Natural England, will designate it, for capital taxation purposes, as of outstanding scenic, historic or scientific interest. Conditional exemption from the tax helps owners keep heritage estates intact and maintain them properly.

Maintenance Funds

Alternatively, or additionally, owners can set up a Maintenance Fund, a trust fund to maintain heritage land. This involves designation (as above) and the Fund itself receives certain tax privileges such as exemption from the normal Inheritance Tax charge on settled property.

Conditions (undertakings)

HM Revenue & Customs agrees to the tax exemption in return for agreed public benefits. The owner agrees to undertake specific actions to:

  • maintain the land

  • preserve its character

  • provide reasonable public access

  • publicise the access and the undertakings

Monitoring

HM Revenue & Customs requires owners to report annually on the steps taken to comply with the undertakings. Natural England inspects the designated land every 5 years to check the land remains in good condition and the owners are providing and publicising the access as agreed. An owner who does not adhere to the conditions, or disposes of the property, will lose the exemption, and the tax will then become chargeable.

For more information, visit the HMRC websiteexternal link.