Acceptance in lieu: paying IHT with heritage objects

Q: What kinds of property can be offered?

Section 230 covers three categories: Preeminent objects and collections (section 230(4)): any picture, print, book, manuscript, work of art, scientific object or other thing, or a collection or group of them, that the Secretary of State is satisfied is preeminent for its national, scientific, historic or artistic interest. National interest includes interest within any part of the UK, and regard is had to any significant association with a particular place. Objects kept in certain buildings (section 230(3)): for example where the building itself has been accepted in lieu, belongs to the Crown or a government department, is in the guardianship of the Secretary of State or the Welsh Ministers, or belongs to a body in Schedule 3, and it is desirable for the objects to remain associated with it. Historic buildings and estates (section 230(2)): the guidance says these would not normally be acceptable unless outstanding in terms of the natural or built heritage, and an offer must identify a willing recipient in advance. The guidance adds that HMRC cannot accept part of an item, such as a half share in a painting, although co owners who are each liable can offer their shares together. The item offered need not come from the estate on which the tax is due.

Q: How much tax does an accepted item settle?

The amount is the special price, built on a sharing arrangement known as the douceur. Statement of Practice 6 (1987) explains that no capital tax is payable on property accepted in lieu, and that the special price is found by agreeing a value and deducting a proportion of the tax given up on the item itself. Chapter 11 of the heritage guidance fixes the percentages for offers in lieu: the owner keeps 25% of the notional tax on an object, or 32.5% where the 36% charity rate applies to the estate, and 10% (or 19%) for buildings and estates. HMRC does not give change: if the special price exceeds the liability, the excess is neither refunded nor carried forward. Illustration only. An estate includes a preeminent painting agreed at £1,000,000, and its executors face a large inheritance tax bill on the rest of the estate. Assume no notional capital gains tax. StepAmount Agreed value£1,000,000 Notional IHT at 40%£400,000 Net value£600,000 Douceur: 25% of £400,000£100,000 Special price (tax settled)£700,000 Sold on the open market, the painting would bear £400,000 of tax and leave about £600,000 before selling costs. Accepted in lieu, it settles £700,000 of tax. The guidance also confirms that acceptance triggers no capital gains tax, Stamp Duty Land Tax or VAT. The douceur only applies where the item would qualify for conditional exemption, so it is not available, for example, where the item is in residue passing to a surviving spouse.

Q: Can the offer carry conditions?

Precatory offers express a wish that the item go to a particular institution, which is accommodated where possible. Conditional offers make allocation a condition; if it cannot be endorsed, the offeror must accept the decision or withdraw. Hybrid offers deal with an item worth more than the liability: the whole item is accepted and the receiving museum pays the offeror some or all of the difference by private arrangement. In situ offers ask that objects stay in their historic setting; a willing institution must take ownership and the owner of the building must agree terms on care and public access.

Acceptance in lieu lets a person who owes inheritance tax hand over a nationally important object, collection or historic property instead of cash. HMRC accepts it only with the agreement of the relevant culture minister, the item passes to a public collection, and the amount of tax it settles (the special price) usually beats what the owner would keep after selling at auction and paying the tax.

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What is acceptance in lieu?

Section 230 of the Inheritance Tax Act 1984 allows HMRC, if it thinks fit and the Secretary of State agrees, to accept property in satisfaction of all or part of the tax, and of interest on it, on the application of a person liable to pay. HMRC’s Inheritance Tax Manual at IHTM30185 notes that this is often known as Acceptance in Lieu and that offers must be referred straight to HMRC’s Heritage team.

HMRC’s guidance on capital taxation and the national heritage, Chapter 11, explains that HMRC does not keep the property. Once agreement is reached, the Secretary of State directs that ownership pass to a suitable body, usually a museum, gallery, library or archive. In England the decisions on objects are usually exercised within Arts Council England; there are separate arrangements where there is a Scottish or Welsh interest, reflected in section 230(6) and (7).

What kinds of property can be offered?

Section 230 covers three categories:

Preeminent objects and collections (section 230(4)): any picture, print, book, manuscript, work of art, scientific object or other thing, or a collection or group of them, that the Secretary of State is satisfied is preeminent for its national, scientific, historic or artistic interest. National interest includes interest within any part of the UK, and regard is had to any significant association with a particular place.
Objects kept in certain buildings (section 230(3)): for example where the building itself has been accepted in lieu, belongs to the Crown or a government department, is in the guardianship of the Secretary of State or the Welsh Ministers, or belongs to a body in Schedule 3, and it is desirable for the objects to remain associated with it.
Historic buildings and estates (section 230(2)): the guidance says these would not normally be acceptable unless outstanding in terms of the natural or built heritage, and an offer must identify a willing recipient in advance.

The guidance adds that HMRC cannot accept part of an item, such as a half share in a painting, although co owners who are each liable can offer their shares together. The item offered need not come from the estate on which the tax is due.

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How is preeminence judged?

HMRC takes advice from Arts Council England, whose Acceptance in Lieu Panel appoints expert advisers. The guidance sets out four long standing questions: does the object have an especially close association with UK history and national life; is it of especial artistic or art historical interest; is it of especial importance for the study of a particular form of art, learning or history; and does it have an especially close association with a particular historic setting. Preeminence can be local: an object may qualify because it would be preeminent in a regional or university museum.

How much tax does an accepted item settle?

The amount is the special price, built on a sharing arrangement known as the douceur. Statement of Practice 6 (1987) explains that no capital tax is payable on property accepted in lieu, and that the special price is found by agreeing a value and deducting a proportion of the tax given up on the item itself. Chapter 11 of the heritage guidance fixes the percentages for offers in lieu: the owner keeps 25% of the notional tax on an object, or 32.5% where the 36% charity rate applies to the estate, and 10% (or 19%) for buildings and estates. HMRC does not give change: if the special price exceeds the liability, the excess is neither refunded nor carried forward.

Illustration only. An estate includes a preeminent painting agreed at £1,000,000, and its executors face a large inheritance tax bill on the rest of the estate. Assume no notional capital gains tax.

Step	Amount
Agreed value	£1,000,000
Notional IHT at 40%	£400,000
Net value	£600,000
Douceur: 25% of £400,000	£100,000
Special price (tax settled)	£700,000

Sold on the open market, the painting would bear £400,000 of tax and leave about £600,000 before selling costs. Accepted in lieu, it settles £700,000 of tax. The guidance also confirms that acceptance triggers no capital gains tax, Stamp Duty Land Tax or VAT. The douceur only applies where the item would qualify for conditional exemption, so it is not available, for example, where the item is in residue passing to a surviving spouse.

Who can make an offer, and when?

Only a person liable to pay the tax or interest, or who bears it, can offer. The guidance gives the example of a specific legacy of a painting that is free of tax: the legatee does not bear the tax and cannot offer it unless also a residuary beneficiary, though a redirection under section 142 can sometimes fix this (see deeds of variation). There are no forms and no time limits. HMRC will register an offer made before the grant of probate but will not deal with it until the grant is issued (IHTM30185), so executors still need to fund the tax payable on delivering the IHT400 (see paying inheritance tax before probate). An offer can still be made where all the tax was paid to obtain the grant, if HMRC is told within three months of paying that an offer may follow.

The offer goes to HMRC, not to Arts Council England, and should include the offerors and their capacity, a description and valuation of each item, any wish or condition about allocation, the folder of particulars Arts Council England asks for, the location of each item, a calculation of the special price and a due diligence questionnaire on provenance.

What happens to interest while the offer is considered?

Statement of Practice 6 (1987) lets the offeror choose whether the special price is based on value at the date of offer or at the date of acceptance. HMRC assumes the offer date basis unless told otherwise, and on that basis interest on the tax to be satisfied stops running from the offer date (see also IHTM30373). The option normally stays open until acceptance, but if more than two years pass without terms being settled, HMRC may give six months’ notice that it will no longer accept on the offer date basis. Changing the items offered or adding a new condition counts as a new offer, with a new offer date.

Can the offer carry conditions?

Precatory offers express a wish that the item go to a particular institution, which is accommodated where possible.
Conditional offers make allocation a condition; if it cannot be endorsed, the offeror must accept the decision or withdraw.
Hybrid offers deal with an item worth more than the liability: the whole item is accepted and the receiving museum pays the offeror some or all of the difference by private arrangement.
In situ offers ask that objects stay in their historic setting; a willing institution must take ownership and the owner of the building must agree terms on care and public access.

What mistakes come up most often?

Offering an item whose special price exceeds the tax without structuring a hybrid offer, and losing the excess.
Assuming acceptance is automatic. Preeminence is necessary but not sufficient, and the minister has the final say.
Making the offer through a person who does not bear the tax.
Changing the offer midway and losing the original offer date for interest.
Treating acceptance in lieu as a way to pay before probate. It is not. Executors may still need other funding or instalments.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.