Inheritance Tax Act 1984 Schedule 5 paragraphs 1–2

Charge on failure of condition of exemption—objects

Section 31 of the Finance Act 1975 allowed certain heritage objects to be left out of account for inheritance tax purposes on death, provided undertakings were given about their preservation and public access. Paragraphs 1 and 2 of Schedule 5 set out when and how tax becomes chargeable if those conditions are broken or the object is disposed of.

• If the undertaking given in respect of a conditionally exempt object is not observed in a material respect, inheritance tax becomes chargeable on that object.
• If the object is disposed of (whether by sale or otherwise), tax is also triggered — but where the object was left out of account on more than one death, the charge arises only by reference to the last death.
• No charge arises on a disposal to a national heritage body listed in Schedule 3, or on a non-sale disposal where a replacement undertaking is given; nor does acceptance of the object in satisfaction of tax count as a disposal.
• The tax charged is the amount that would have been attributable to the object on the original death, recalculated using the object's value (or sale proceeds) at the time of the chargeable event, with special aggregation rules where objects forming a set are disposed of at different times.

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