Inheritance Tax Act 1984 Schedule 5 paragraphs 3–4

Charge on failure of condition of exemption—buildings etc.

Section 31A Schedule 5 paragraphs 3 and 4 set out when inheritance tax becomes chargeable on conditionally exempt property (such as heritage buildings, their associated land and objects) if the conditions of exemption are broken, and how that tax charge is calculated.

• If an undertaking given in respect of conditionally exempt property is breached in a material way, tax becomes chargeable on the property and any property associated with it (such as the building, its surrounding land and contents taken together).
• If the property is disposed of (whether by sale or otherwise), tax similarly becomes chargeable, but only by reference to the most recent death at which the exemption was claimed if more than one death is involved.
• Disposals to national heritage bodies listed in Schedule 3, disposals where a replacement undertaking is given, and acceptances of property in satisfaction of tax under section 230 do not trigger the charge; additionally, the Treasury may limit the charge to only the specific property affected if the heritage entity as a whole has not been materially altered.
• The tax charged is calculated as the amount that would have been due on the relevant death had the exemption not applied, but using the value of the property at the time the charge arises (or the sale proceeds if the property is sold under approved conditions) rather than its value at the date of death.