The Conditional Exemption Regime is a valuable tool to mitigate exposure to inheritance tax (IHT) and capital gains tax (CGT) where important heritage assets are owned. It is, however, a complex and limited scheme with onerous obligations, as Olivia Meekin explains.
To understand the Conditional Exemption Regime, it is helpful to look at its origins. It is a scheme designed to save national heritage assets for the nation and the benefit of the public that might otherwise be lost following the forced sale to meet tax liabilities.
It is not a scheme that allows individuals to avoid IHT or CGT entirely but instead defers any tax due as long as the asset owners continue to meet the requirements of the Conditional Exemption Regime.
It is typically open to stately or important homes, land and gardens of outstanding scenic or historical interest and works of art and objects of national, scientific, historic or artistic pre-eminence.
To qualify, assets will need to be assessed by the relevant government heritage body, for example, Natural England for landscapes and English Heritage for buildings, to ensure they meet the required high standards.
In return for deferring tax liabilities, the scheme will require those assets to be maintained with public access to those assets for at least three months every year.
HMRC is quite specific in its guidance on public access. It will typically require access for one day a week, with one of those days being a public bank holiday, during the spring and summer months. Access should be for at least four hours a day between 10am and 5pm.
Additionally, asset owners will be expected to allow access by prior arrangement on days when not open to the public for research and study. Where assets cannot be viewed in situ, it can be possible for the public access requirement to be met via loans to museums or galleries.
In addition to public access, HMRC will usually expect to see a heritage management plan, demonstrating the asset owner knows what is expected of them and has the resources in place to meet those undertakings.
That heritage management plan may, particularly where property or land is involved, include a ‘maintenance fund’ – effectively a trust designed to support its ongoing maintenance. Unlike most trusts, there will be no IHT or CGT charge on income-generating assets in the trust as long as the trust is only used to maintain those specific assets in the scheme.
Assets under the Conditional Exemption Regime will be regularly reviewed by the relevant body, typically every five years, to ensure the qualifying criteria continue to be met.
The Conditional Exemption Regime is not one to be entered lightly. It will tie a building, land or asset into the scheme, often for lengthy periods of time and with onerous obligations. For example, if a building is open to the public, a health and safety assessment is likely to be needed, plus relevant insurance policies, disabled access and toilet facilities.
It does not avoid IHT or CGT permanently and can leave asset owners and future generations with difficult decisions to make.
Contact our Private Client Solicitors
If you are in need of advice or assistance on any of the legal issues mentioned in this article, please contact Olivia Meekin, Partner or any member of our experienced Private Client team on 020 7631 4141 or email privateclient@bishopandsewell.co.uk
The above is accurate as at 31 March 2025. The information above may be subject to change.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
