Heritage reliefs: preserving heritage, reducing tax

For many years, agricultural property relief and business property relief have been the main tools for reducing Inheritance Tax (IHT) exposure. However, with recent reforms limiting both reliefs to a £2.5 million cap, high-value estates may find these traditional strategies less effective. In this evolving landscape, heritage property reliefs (such as Acceptance in Lieu and the Conditional Exemption) are emerging as uncapped alternatives worthy of renewed attention.

These reliefs are especially relevant to owners of landed estates, historic houses and their grounds, as well as collections of significant artworks or objects. For such estates, heritage reliefs can provide a valuable route to mitigating IHT while preserving important assets.

Conditional Exemption

Conditional Exemption is a temporary exemption from IHT. The relief operates by deferring the IHT that would otherwise fall due on the assets in question. 

It can apply to a wide range of heritage assets. These include:

• objects which are pre-eminent for their national, scientific, historic or artistic significance
• land of exceptional scenic, historic or scientific interest
• buildings whose preservation warrants special care as a result of its historic or architectural interest, along with associated land, or objects with a historical association.  

This deferment of the liability to tax is conditional on the below:

• Providing public access to the asset for a number of days in the calendar year to be agreed with HMRC (a minimum of 28), either in their current location or in a museum
• Keeping the item in the UK (except for any period/purpose approved by HMRC)
• Taking reasonable steps to preserve the asset

IHT becomes payable if the owner fails to meet the required conditions, sells the asset or disposes of it by some other means (a gift to children perhaps). The IHT would also become payable on the owner’s death. In the case of a gift or inheritance, the new owner can apply to renew the exemption and the transfer can also benefit from a capital gains tax deferment.

Claiming Conditional Exemption involves completing form IHT420 and liaising with HMRC’s Heritage Team. A professional will typically need to prepare an inventory of the assets and set out why they qualify for the exemption, along with details of how the public will be able to access them. Arts Council England or Heritage England then reviews the application and assesses the items’ pre-eminence or historic value, which may include an on-site inspection.

Acceptance in Lieu

Acceptance in Lieu allows individuals to settle an IHT liability by transferring objects of significant cultural, scientific, or historic value to the nation. This can avoid the complication and risk associated with selling assets in order to fund an IHT liability. Due to a complex function of the relief and the way the value of the asset and associated tax credit is calculated for these purposes, this value is often higher than the post IHT value in the estate.  

To obtain this relief, an application must be submitted to the Acceptance in Lieu panel, which appoints specialist advisers to assess whether the claim should be approved. If the application is accepted, the necessary directions and arrangements are put in place to transfer the property. Once the transfer is completed, HMRC draws down the corresponding tax credit.

Why expertise matters

Both Conditional Exemption and Acceptance in Lieu can offer valuable savings. Equally, they are not always the optimal choice.

Conditional Exemption may restrict alternative uses (such as environmentally beneficial schemes for landowners) and, if later reversed, trigger significant tax charges. Executors considering Acceptance in Lieu must obtain independent valuations, potentially instruct additional experts, and should also consider the risk of dispute where beneficiaries were expecting specific items from the estate.

Heritage reliefs present unique opportunities - but also complex challenges. Applications require detailed knowledge of eligibility criteria, valuation processes, and negotiation with multiple stakeholders. Missteps can result in delays, unexpected tax liabilities, or missed opportunities.

Our Private Wealth team at Foot Anstey combines technical expertise with a deep understanding of estate planning and succession objectives. We work closely with clients and independent experts to:

• Assess whether heritage reliefs align with their broader goals
• Prepare robust applications and supporting documentation
• Manage negotiations and compliance to secure relief efficiently

By taking a strategic approach, we help clients preserve heritage assets while mitigating tax risk — ensuring that decisions made today stand the test of time.