Relaxation of Conditional Exemption requirements

1 Apr 2020

spiral staircase

Many owners of heritage property will have Conditional Exemption arrangements in place with HM Revenue & Customs (HMRC), to exempt the qualifying assets from inheritance tax and capital gains tax.

These arrangements are often used for outstanding land and buildings, and works of art and other objects (either individually or as part of a collection) that are of pre-eminence for their national, scientific, historic or artistic interest, or that are historically associated with an outstanding building.

In addition to undertaking to preserve, maintain and repair the asset, and to retain it in the UK (if it is moveable), the owner will also be required to grant and publicise reasonable public access to the asset. There is usually a minimum number of days per annum on which open access must be granted. Certain qualifying items can be loaned to museums or galleries if in situ access is not appropriate, and there can also be supplementary access by appointment.

As we move into spring and the weather is improving, many heritage property owners had been gearing up to open to the public, not just to generate vital income streams, but also to satisfy the undertakings of their Conditional Exemption agreement.

Those already open had seen a significant decrease in footfall. However, with the restrictions now imposed by government on business operation and on public movement due to the Coronavirus outbreak, those heritage property owners now find themselves unable to open at all, and with concerns over their ability to meet the undertakings agreed with HMRC as part of their Conditional Exemption arrangements.

Updated guidance from HMRC

Given the current situation and the difficulty facing heritage property owners, HMRC has issued updated guidance.

Closing or delaying the opening of your property

National heritage property owners are being advised to follow Public Health England’s social distancing guidance.

Where the owner of a national heritage property closes, or delays opening until later in 2020, HMRC will not consider that the Conditional Exemption agreement has been broken. This relaxation will apply even if it means some of the period covered by an agreement is missed, or if an owner does not open to the public at all in 2020.

If the situation improves, HMRC does expect property owners to open later in the year and to make up for any lost days, if that is possible and reasonable in the circumstances. Additional open days next year, to make up for those missed in 2020, will not be required.

For objects

If a conditionally exempt object is on loan to a museum, gallery or other venue that has closed, the withdrawal of public access to the object will not be treated as a contravention of the agreement with HMRC.

Again, this will apply even if it means the object in question is not on show at all in 2020.

If an object can only be seen by appointment, then the object owner will not be expected to agree to a viewing until the government’s advice changes, and refusal of any viewing in the meantime will not be considered a contravention of the agreement.

Please speak to your usual Saffery Champness partner if you have any queries relating to Conditional Exemption.