How IHT exemption for significant heritage property works
© Adobe Stock The possibility of an exemption from inheritance tax (IHT) on the grounds that land or buildings are of heritage significance has attracted a lot of media attention in the past few weeks.
HMRC’s conditional exemption tax incentive offers the owners of certain land and buildings exemption from IHT and capital gains tax (CGT) when they pass either by inheritance or as a gift.
See also: IHT changes ahead – further options to reduce tax liability
This is only available where land is of outstanding scenic, historic or scientific interest, and tax and legal advisers caution that a decision to claim it must be very carefully weighed.
Henry Fea, partner at law firm Charles Russell Speechlys, expects an increasing interest in claiming conditional exemption for land, given the restriction of agricultural and business property relief, on which most farmers would have relied, from April 2026.
He points out that along with land of outstanding scenic, historic or scientific interest, buildings within that land which, on their own, are not historically or architecturally outstanding, can be included in the exemption.
While 100% relief from IHT is attractive, the downsides include that the tax becomes due immediately if the land is sold or otherwise transferred to a new owner, although the exemption can continue if the new owner agrees to take on the outgoing owner’s obligations.
Exemptions are granted with conditions attached, requiring reasonable public access and maintenance of the heritage assets.
“Conditional exemption is normally considered the tax planning of last resort because it only defers the tax, says Henry. “If 100% reliefs, allowances or absolute exemptions are available, these will be preferable.
“Families will need to be very sure that they are happy to retain the land, and keep the undertakings, before entering into the conditional exemption regime, otherwise the ultimate tax burden to unwind that arrangement could be much higher than that which they sought to defer initially,” says Henry.
A breach of undertakings also means that reliefs such as agricultural property relief or business property relief will not be available, even if the assets would otherwise qualify.
“Consider the practicalities of allowing public access, including health and safety, parking, toilet facilities, disabled access, risk of trespass and theft, any change of use or planning consents required, and so on.
“On the positive side, it can result in additional sources of income, including from entry fees, parking, cafes and other enterprises.”
Insurance implications
Public access requirements give rise to liability issues, calling for a review of public liability insurance cover say advisers.
At law firm Shakespeare Martineau, head of trusts and estates disputes Andrew Wilkinson says that conditional exemption is potentially incredibly valuable because there is no limit or cap.
However, he points out that its availability will be limited.
“Farms in National Parks and other special designations for example may be better placed than many others to qualify, on a landscape basis, but that doesn’t mean all farms in a National Park will be eligible.
“There has to be something special and outstanding about a landscape within its general context.”
© Adobe Stock
Sites of special scientific interest are likely to qualify, alongside special areas of conservation, and in some cases historic woodland, he says.
With the expectation of a rise in claims Andrew anticipates that further guidance may be issued by HMRC.
Will Leonard is a director with accountant Saffery and also expects conditional exemption claims to rise and for HMRC to start reviewing claims with renewed interest as a result.
He cautions that the threshold assets must meet to qualify for the exemption is very high.
“For the lucky few with the right land this can be a very helpful relief although they need to be clear about the conditions and the additional work associated with permitting public access,” says Will.
“Access arrangements are typically opening for one month a year to the public, although they vary by asset type and condition.
“In the case of land we have previously seen this achieved through improvements to existing designated foot and bridle paths and through the creation of new permissive footpaths across the land.”
Will warns that certain grants and payments would not be available on property that is conditionally exempt. Some listed buildings are eligible for conditional exemption, with the classifications varying between the nations of the UK.
Why does heritage relief exist?
Tax relief has been available for privately owned nationally important heritage property for more than 100 years, supported by successive governments.
The requirement for reasonable public access was introduced in 1975, with public access rights extended in the Finance Act 1998, along with publication of the terms of undertakings.
The policies have been designed to conserve national heritage items for the benefit of the public and to avoid the sale of assets being forced by the need to fund the tax due on them.
Heritage relief – what is the process?
A claim for conditional exemption must generally be made to HMRC within two years of what is known as the “relevant chargeable event” – a transfer of property that would otherwise attract IHT or CGT.
This must show that the property’s heritage value meets HMRC’s “pre-eminent” standard, which is assessed by expert bodies advising HMRC.
These are Natural England, Scottish Natural Heritage, Natural Resources Wales and the Northern Ireland Environment Agency.
Before the claim is referred to the relevant expert body, it must contain an offer of workable arrangements for public access, with the remaining access details agreed and put into formal undertakings.
© Adobe Stock
If access arrangements are not settled within a reasonable timeframe (such as six months after the claim or pre-eminence agreement), HMRC may refuse the exemption and impose tax instead.
Owners must also agree to maintain and preserve the property, with these undertakings tailored to each property and its circumstances.
Failure to comply with the undertakings can mean the loss of conditional exemption status and the imposition of tax charges.
How do I know if my land is suitable?
It is only possible to find out definitively if land meets the requirements for conditional exemption by making a claim following a chargeable event – a death, sale or transfer of the land.
However, an advisory opinion can be obtained from the relevant expert body, although these opinions are not binding on either the body or HMRC and do not guarantee a formal designation in future.
Maintenance fund
Another option is to set up what is known as a maintenance fund, so that capital and income from other, non-qualifying assets can be used to provide financial support for the maintenance, repair and preservation of heritage property.
Transfers of property into a maintenance fund are exempt from IHT, provided the fund meets specific conditions, including using its resources for heritage purposes for at least six years.
If it is accepted that the property supported by the fund meets the definition of “heritage” at that time, then it is very likely that it would also meet the pre-eminent requirements for conditional exemption if subsequently it became subject to a chargeable event such as the death of the owner, says Henry.
Location of land with conditional exemptions
Land and property with a conditional exemption from inheritance tax is listed by region on the HM Revenue & Customs website.
Go to the regions list downpage to select an area.
This shows location, access arrangements and gives contact details for those who manage the site.
Tenants’ interests need protection – TFA
There is no obligation on a landlord to inform a tenant that the land they farm is subject to conditional exemption from IHT, says TFA chief executive George Dunn.
However, tenants need to know what undertakings have been agreed to for their particular land, he says, pointing out that the agreements are individual and could affect the way the land is farmed,
If more landlords succeed in claiming conditional relief, it could affect many more tenants who may be restricted in entering government environmental schemes such as the Sustainable Farming Incentive and Countryside Stewardship in England and the Sustainable Farming Scheme in Wales, as the public purse will not want to double fund activities for which conditional relief from IHT has already been granted to the owners of that land, says the TFA.
“Landlords seeking to make use of this heritage relief must ensure to inform their tenants to avoid problems with schemes in the future,” says George.
“In addition, given that such relief available to the landlord will reduce options for the tenant, rental levels will need to reflect the lack of ability for tenants to join other publicly funded schemes.”
The grants and funding available on land which is conditionally exempt from IHT are listed on the gov.uk website.