Conditional exemption removes inheritance tax from a transfer of a nationally important building, area of outstanding scenic, historic or scientific interest, or work of art, as long as the new owner gives undertakings to preserve it, keep objects in the UK and allow reasonable public access. The exemption has to be claimed, normally within two years, and HMRC decides whether the asset is good enough. If the undertakings are broken or the asset is later sold, given away or passes on a death without fresh undertakings, the tax deferred becomes payable.

What kinds of asset can qualify?

Section 31(1) of the Inheritance Tax Act 1984 (IHTA 1984) lists what HMRC (acting for the Treasury) can designate:

  • any object, or collection or group of objects, that is preeminent for its national, scientific, historic or artistic interest, such as a picture, book, manuscript, work of art or scientific object;
  • any area of outstanding scenic, historic or scientific interest;
  • any building of outstanding historic or architectural interest that should be preserved;
  • any area essential for protecting the character and amenities of such a building, often called amenity ground;
  • any object historically associated with such a building.

HMRC’s guidance, Capital taxation and the national heritage, says that a building listed Grade I or II* in England and Wales, a Scheduled Monument, Grade A or B+ in Northern Ireland or Category A in Scotland is a reasonable indication, though not a guarantee, that it will be accepted as outstanding. HMRC decides on the advice of the government’s heritage advisory agencies, and the same guidance notes there is no appeal against a refusal on quality grounds short of judicial review. The joint guidance for woodland owners on GOV.UK adds that ancient semi natural woodland may qualify on scientific, scenic or historic grounds.

This page deals with the tax exemption. The separate question of how heritage assets appear in the accounts of a charity or museum is covered on our page on heritage assets accounting.

What undertakings does the owner have to give?

For objects, section 31(2) requires an undertaking that, until the owner dies or disposes of the object, it will be kept permanently in the UK, leaving only temporarily for a purpose and period HMRC approves, and that agreed steps will be taken to preserve it and secure reasonable public access. For buildings and other property, section 31(4) requires agreed steps for maintenance, repair and preservation, keeping associated objects with the building, and reasonable public access.

Since the Finance Act 1998 changes, section 31(4FA) says public access cannot be limited to visits by prior appointment, and section 31(4FB) allows undertakings to require publication of their terms. In practice, HMRC’s guidance says it generally seeks access to the interior of a smaller building on at least one day a week plus public holidays during spring and summer, amounting to 28 days a year, or 25 where appropriate in Northern Ireland, Scotland and Wales. Owners commonly meet this through events such as Heritage Open Days.

For objects seen by appointment, GOV.UK guidance on tax relief for national heritage assets says the owner should normally offer a choice of at least 3 weekdays and 2 weekend days within 4 weeks of a request, between 10am and 4pm. Details of exempt assets and how to see them are published by HMRC.

Which transfers can be conditionally exempt?

Section 30 sets the rules on timing:

  • Transfers on death qualify without any minimum ownership period.
  • Lifetime transfers qualify only if the transferor or their spouse or civil partner, or the two together, owned the property for the six years ending with the transfer, or the transferor acquired it on a death that was itself a conditionally exempt transfer (section 30(3)).
  • Potentially exempt transfers cannot be claimed for until the donor has died (section 30(3B)), and the exemption is not available if the recipient sold the property before the death (section 30(3C)).
  • Spouse and charity transfers do not need it. Section 30(4) disapplies conditional exemption to the extent the transfer is already exempt under section 18 or section 23.

Relevant property trusts have parallel rules in sections 78 and 79, including a six year ownership condition for distributions.

How and when is the claim made?

Section 30(3BA) requires the claim within two years of the transfer or, for a failed potentially exempt transfer, two years of the death, unless HMRC allows longer. HMRC’s guidance says oversight by the claimant or adviser, a post death variation, or the failure of a claim for another relief is not normally an acceptable reason for a late claim.

On a death, the claim is made on form IHT420, a schedule to the IHT400 account (see completing the IHT400). If it cannot go on the account, it should be made in writing as early as possible. To protect the position within the two years, the claim should state that exemption is claimed and for which event, identify each asset, and give a brief explanation of why it qualifies, confirming that access proposals will follow. Where business relief or agricultural property relief might be due instead, HMRC recommends a protective conditional exemption claim at the outset.

What brings the exemption to an end?

Under section 32, tax is charged on the first chargeable event after the exempt transfer. The chargeable events are:

  • HMRC being satisfied that an undertaking has not been observed in a material respect;
  • the death of the person beneficially entitled to the property;
  • a disposal of the property by sale, gift or otherwise.

A death or disposal is not a chargeable event if, within three years of the death, the personal representatives sell the property by private treaty or give it to a body in Schedule 3, such as a national museum, or it is accepted in lieu of tax under section 230. Gifts to the nation under Schedule 14 to Finance Act 2012 are also excepted. A death or gift (but not a sale) escapes the charge if it is itself a conditionally exempt transfer or the new owner gives fresh undertakings (section 32(5) and (5AA)).

The capital gains position follows. Section 258 of the Taxation of Chargeable Gains Act 1992 treats a gift of designated property as giving neither gain nor loss where undertakings are given, exempts sales by private treaty to Schedule 3 bodies and acceptance in lieu, and treats a later sale or breach as a disposal at market value. HMRC’s guidance says the two year limit does not apply to this capital gains relief.

How is the tax worked out when a charge arises?

Section 33 charges tax on the value of the property at the time of the chargeable event. If the event is an arm’s length sale between unconnected persons with no gratuitous intent, the sale proceeds are used. The rate depends on the “relevant person”, normally whoever made the last conditionally exempt transfer:

  • if that person is alive, the rate is the lifetime rate that would apply if they made a chargeable transfer of that amount at that time;
  • if they have died, the amount is treated as added to the value transferred on their death and taxed as the top slice, at death rates where the exempt transfer was made on death.

Where there have been two or more conditionally exempt transfers within 30 years of the event, HMRC can choose which transferor to use (section 33(5)). Tax charged on a later chargeable transfer of the same property can be credited against the recapture charge (section 33(7)).

How might this work in practice?

Illustration only. Helen dies leaving a Grade I listed house and a collection of family portraits to her nephew. Her executors claim conditional exemption on the IHT420 within two years. HMRC designates the house and the portraits historically associated with it, and the nephew agrees to open the house for 28 days a year and to keep the portraits there. No inheritance tax is paid on those assets on Helen’s death. Twelve years later the nephew sells one portrait at auction for £400,000. That sale is a chargeable event. Tax is charged on £400,000 as if it were the top slice of Helen’s death estate, at the rates that applied to her death, and capital gains tax is worked out on the nephew’s sale at market value under section 258(5). Had he sold the portrait by private treaty to a national gallery, there would have been no inheritance tax charge.

What should owners and advisers watch for?

  • Missing the two year deadline. HMRC’s discretion to extend it is narrow.
  • Underestimating the access commitment, which must include open access and published terms, not just viewing by appointment.
  • Moving designated objects abroad, even temporarily for a loan or sale, without HMRC approval, which can be a breach.
  • Selling at auction when a private treaty sale to a Schedule 3 body or acceptance in lieu would avoid the charge altogether.
  • Forgetting that clearance certificates exclude conditionally exempt property (IHTM40133); see IHT30 clearance certificates.

Owners of commercial forestry should also look at woodlands relief, which defers tax on timber without any public access condition.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.