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Tax Relief for Listed Buildings and Other Heritage Assets

There are a number of tax breaks that can benefit the owners of heritage assets to assist with their conservation.

The conditions and qualifications are a matter of some complexity and specialist advice should be sought by anyone who believes they may qualify for relief. The following is only a brief introduction.

Capital Gains Tax and Inheritance Tax

Capital gains tax relief, such as the principal private residence and roll-over relief, apply to heritage assets just as they do to any other building or site.

Gifts of 'qualifying property' to a charity and to certain heritage bodies such as Historic England, the National Trust, the National Churches Trust, Natural England, any local authority, Government department or university also qualify for roll-over relief for capital gains tax purposes and are exempt from inheritance tax.

There are also special provisions to assist a fund set up for the maintenance of a building of outstanding interest, its amenity land and objects historically associated with it; and also for land of outstanding scenic, scientific or historic interest. Relief from capital gains tax and inheritance tax may be available when the fund is set up, on the income of the fund and also when capital is spent from the fund for a purpose connected with the property.

Conditional Exemption for Buildings of Outstanding Interest

Inheritance tax is payable on the death of an owner or on a gift made within 7 years of death. This may be exempted if the asset falls into one of the following categories:

  • Objects or collections of objects pre-eminent for their national, scientific, historic or artistic interest; 
  • Land of outstanding scenic, scientific or historic interest; 
  • Buildings of outstanding historic or architectural interest; 
  • Land essential for the protection of the character and amenities of an outstanding building; 
  • Objects historically associated with an outstanding building.

The new owner must undertake that reasonable access will be provided for the public and that reasonable steps will be taken for maintenance, preservation and repair.

What is 'outstanding' is a matter of judgment, but in the case of buildings, it is likely that such buildings will be listed at Grade I or II* or be a scheduled monument.

HMRC takes advice from Historic England, Natural England and other specialist public bodies on whether a property qualifies for the exemption.

Conditional exemption is not lost on the subsequent disposal of the property, on the subsequent death of the recipient or a further lifetime transfer or gift to a heritage body as long as further undertakings as to access and maintenance are entered into by the new owner.

Private Treaty Sales

Private treaty sales to some museum and heritage bodies (1) (including Historic England and the National Trust) frequently offer substantial financial advantages to owners.

If conditionally exempt property, or property that would qualify for conditional exemption, is sold on the open market any tax exemption is lost and the seller may also be liable to capital gains tax on the sale proceeds. The tax charges can be substantial and the final net amount retained by the seller significantly less than the proceeds of sale.

However, sale by private treaty to one of these bodies does not lead to the withdrawal of the conditional exemption or to a charge to inheritance or capital gains tax. As the seller receives the proceeds without any liability to tax it is not unreasonable that the acquiring institution should offer, and the seller be prepared to accept, a lower price than would prevail if the proceeds were taxable.

The arrangement enables the acquiring institution to pay the agreed market value net of the tax the seller would have had to pay, sweetened by an agreed percentage of that tax (the so-called douceur). This is called the special price. In this way the seller and the acquiring institution share the value of the tax exemption.

Acceptance in Lieu

The Acceptance in Lieu Scheme enables taxpayers to transfer heritage assets into public ownership in part or whole payment for an Inheritance Tax liability (2).

The taxpayer is given the full open market value of the item, which is then allocated to a public museum, archive or library. In satisfying a tax liability, an offeror is able to apply a higher proportion of the value of an object if it is offered in lieu of tax than if the same object is offered at auction in order to raise funds to settle the tax liability.

The scheme is administered by the Arts Council and the Department for Culture, Media and Sport.


As from 1 October 2012 VAT at the standard rate (20%) applies to all materials and services supplied in the course of approved alterations to listed buildings or scheduled monuments.

Previously the cost of approved alterations was zero rated for VAT. There are transitional provisions providing relief from the effects of the change in some circumstances up to 30 September 2015 (3).

VAT paid on repair and maintenance of listed places of worship and on the construction, maintenance and renovation of certain types of memorial can attract a grant up to the value of the tax paid under the memorials grant scheme funded by the Department for Culture, Media and Sport .

The disposal of a protected building after it has been substantially reconstructed is zero rated.

Private treaty sales to some museums and heritage bodies are relieved from VAT (1).

Rating, Council Tax and Uniform Business Rates

Council tax and business rates are based on a valuation of the property. That valuation is in principle the same for heritage assets as it is for any other property. Any limitations on alterations and use and the costs of maintenance of the heritage asset in any particular case are relevant factors in that valuation.

Business rates are payable in respect of all historic buildings except listed or scheduled buildings that are unoccupied. Complications can arise, however, when the listed or scheduled building is only part of the site and/or part of the site is occupied.

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