Inland Revenue 31
17 March 1998
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INHERITANCE TAX: BETTER PUBLIC ACCESS TO HERITAGE ASSETS
The Chancellor has today announced changes to strengthen the
conditions of the inheritance tax exemptions for heritage
assets. The measures are aimed at giving the public better
access to these assets while maintaining protection for the
heritage. The main proposals are:
- for new arrangements, the public will have extended
access to tax exempt assets and there will be greater
disclosure of information about the conditions of the
exemption. Furthermore, it will be possible for the
conditions to be changed later
- for current arrangements, where public access is now only
by appointment, extended access and disclosure of
information will be secured
- for new claims for exemption, chattels (other than those
historically associated with a qualifying building) must
be of pre-eminent heritage quality to qualify for the
exemption
- for transfers made and other events occurring on or after
17 March 1998, the period for claiming heritage
exemptions will be limited to two years after the
relevant transfer or event.
DETAILS
Inheritance tax
1. Exemption from inheritance tax can currently be claimed
for transfers of qualifying heritage assets. Eligible assets
are, broadly: chattels of museum quality; land of outstanding
scenic, historic or scientific interest; and buildings of
outstanding historic or architectural interest, together with
their amenity land and objects historically associated with
them. The exemption is conditional on the new owner
undertaking to maintain and preserve the exempt asset, and
provide reasonable public access to it. Chattels must also
be kept permanently in the UK. If the owner fails to comply
with the undertakings in a material way, the exemption is lost
and tax becomes payable.
2. Exemption from tax may also be claimed for a transfer of
assets to an approved trust established for the maintenance
etc. of a qualifying heritage building. Tax is charged if the
trust ceases to satisfy the statutory conditions or if the
trust assets are applied for a non-approved purpose.
3. Under existing law, public access to exempt assets,
mainly chattels, may be provided through arrangements which
involve making a prior appointment with the owners of those
assets or their agents. Once the terms of an owner's
undertakings have been agreed, they cannot subsequently be
changed except with the owner's consent. The owner of an
exempt asset cannot be required to publicise any information
about the exemption which is otherwise confidential. And the
Inland Revenue cannot disclose the information except with
the owner's consent.
4. For future undertakings given on or after Royal Assent,
the facility for owners to opt for public access only by
prior appointment will be withdrawn. Undertakings will be
open to subsequent changes made with the consent of the owner
or a Special Commissioner, and owners may be required to
publicise their undertakings and disclose any other
information relevant to public access.
5. For existing undertakings involving public access only by
prior appointment, the Inland Revenue will have power to
secure extended access by agreement with the owners concerned
or, if no agreement can be reached, with the consent of a
Special Commissioner.
6. Owners will have six months from the Inland Revenue's
initial proposal for change, to agree revisions to their
undertakings. If no agreement can be reached and a Special
Commissioner considers it just and reasonable to require the
proposed change to be made, he or she may make a direction
accordingly, to take effect from at least 60 days after the
date of the direction.
7. Reliefs for transfers of assets to approved maintenance
trusts for historic buildings may also be subject to
undertakings about public access to heritage property. Such
trusts may therefore be affected by the changes described at
paragraphs 4 to 6 above.
8. At present chattels may qualify for exemption if their
quality makes them suitable for display in a public
collection (whether national, local authority or university)
or if they are historically associated with a qualifying
building. For claims for exemption made on or after the date
of Royal Assent, chattels - other than those historically
associated with a qualifying building, which are not affected
by this proposal - will qualify only if they are pre-eminent
for their national, scientific, historic or artistic
interest. The test will be whether the relevant item or
collection will constitute a pre-eminent addition to a
national, local authority or university collection or whether
it is pre-eminent in association with a particular building.
The same test is currently used as the basis for the
acceptance of heritage assets in satisfaction of inheritance
tax liabilities.
9. Heritage tax exemptions generally have to be claimed and
there is currently no set time limit for making such claims.
For tax charges arising on or after 17 March 1998, claims for
exemption will usually have to be made within two years after
the date of the relevant chargeable event.
10. Under certain transitional provisions, exemption is given
from an inheritance tax charge, arising due to the loss of
conditional exemption from capital transfer tax, if the
undertakings relating to the earlier exemption are replaced by
corresponding undertakings by the appropriate person(s).
Where a replacement undertaking of this kind is given on or
after the date of Royal Assent it will need to comply with the
normal rules for undertakings given on or after that date.
11. For transfers made on or after 17 March 1998, the special
exemption for gifts and bequests to certain non-profit making
bodies will be withdrawn. This provision has for practical
purposes been superseded by the general exemption from
inheritance tax for transfers to charities.
12. Qualifying heritage assets may be offered, and accepted,
in satisfaction of inheritance tax liabilities, including
interest. At present the Inland Revenue is reimbursed by the
Department for Culture, Media and Sport for the liabilities
satisfied in this way. The reimbursement system will be
abolished and the Inland Revenue's accounting procedures will
be amended to reflect the change.
Capital gains tax
13. Disposals of qualifying heritage assets may also qualify
for relief from capital gains tax if either inheritance tax
conditional exemption undertakings apply to the assets or
equivalent undertakings are given under the capital gains tax
provisions. The changes outlined in paragraphs 6 to 8 above
will apply also to any undertakings under those provisions
given on or after Royal Assent.
NOTES FOR EDITORS
1. Inheritance tax (IHT) was introduced in 1986 to replace
capital transfer tax (CTT). The main provisions on the IHT
conditional exemption are to be found in sections 30-35 IHT
Act 1984 and the rules on trusts established for the
maintenance of heritage buildings are in Schedule 4 to that
Act.
2. Gifts and bequests of qualifying heritage assets may
receive exemption from IHT (section 30) if the appropriate
undertakings about conservation and public access are given
(section 31). If there is a material breach of the
undertakings the exemption is lost and tax becomes payable on
the current value of the asset (section 32). Similar rules
apply to transfers involving discretionary trusts (sections
78-79).
3. Under existing arrangements access to exempt chattels
may, at the owner's option, be offered only by prior
appointment. Where this option is chosen, the chattels are
entered in a computerised Register maintained by the Inland
Revenue. The Register is available on the Internet
(www.cto.eds.co.uk) and an electronic copy can be purchased
for 10 pounds.
4. Gifts and bequests to an approved maintenance trust are
also exempt (section 27) and tax is charged if the trust
ceases to meet the statutory conditions or if its assets are
applied for non-qualifying purposes (Schedule 4, paragraph 8).
5. CTT legislation also provided conditional exemption for
transfers of heritage assets in return for undertakings
similar to those required for the corresponding IHT
exemption. The transitional provisions relating to the assets
covered by the CTT exemption are in Schedule 5 to the IHT
Act.
6. Under existing IHT law (section 26) transfers to approved
non-profit making bodies are exempt from tax if the asset
transferred is of heritage quality or it is a source of
income for the upkeep of a heritage building. This provision
has not been used for many years. It is no longer required
as transfers to the bodies concerned are now covered by the
general IHT exemption for charities (section 23).
7. Section 258 Taxation of Chargeable Gains Act 1992
provides relief from capital gains tax for disposals of
qualifying heritage assets if either IHT undertakings apply
to the assets or corresponding undertakings are given under
that provision.
8. Under section 230 IHT Act qualifying heritage assets may,
if the relevant Secretary of State agrees, be accepted in
satisfaction of IHT liabilities including interest.
INLAND REVENUE PRESS OFFICE
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