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HMRC internal manual

Capital Gains Manual

From:
HM Revenue & Customs
Published:
12 March 2016
Updated:
1 October 2026 - See all updates

CG73300 - Land: national heritage

Background

For many years, it has been the policy of successive Governments that certain assets which fall within the broad description of `National Heritage' should be relieved from capital taxes. This relief first related to duties payable on death, for example, Estate Duty. A similar relief was introduced for Capital Gains Tax when that tax was introduced in 1965.

The reliefs apply only if certain conditions are met. The broad aim of these conditions is to ensure that the general public have access to the asset, that the assets are properly maintained and that they are retained in the UK.


Capital Gains Tax reliefs

There are a number of CGT reliefs. TCGA92/S258 gives three types of relief:

  • No gain/no loss treatment on a gift of an asset, or if a person becomes absolutely entitled to an asset as against the trustee, and the appropriate undertaking is given, TCGA92/S258(3). See below.
  • Exemption on the disposal of an asset to a particular type of body, TCGA92/S258(2)(a). See below.
  • Exemption on the disposal of an asset to HMRC in lieu of Inheritance Tax or Estate Duty, TCGA92/S258(2)(b). See below.

See below for guidance on the assets that qualify for relief under section 258.

All claims to relief under TCGA92/S258 should be referred to Specialist PT - IHT - Heritage Team email: Mailpoint F, - (Specialist PT Trusts & Estates. 

Other reliefs are:

Holdover relief under TCGA92/S260(2). See below.

No gain/no loss treatment if an asset is gifted or sold at a loss and undervalue to a charity or body within Schedule 3 IHTA 1984, TCGA92/S257. See CG76501.


Section 258 TCGA: qualifying assets

Section 258 defines the categories of qualifying assets by reference to the list in section 31 Inheritance Tax Act 1984. The main categories of qualifying assets are:

  • Buildings of outstanding historic or architectural interest.
  • Land which is needed for the protection of the character and amenities of buildings of outstanding historic or architectural interest.
  • Objects historically associated with such a building.
  • Land of outstanding scenic, historic or scientific interest.
  • Objects - pictures, prints, books, manuscripts works of art or scientific objects and anything not falling within these categories that do not yield income - pre-eminent for their national, historic or artistic interest.

Any question concerning the status of an asset must be referred to Specialist PT - IHT - Heritage Team.


Section 258(3) and (4) TCGA: no gain, no loss transfers

Section 258(3) and (4) provide that certain disposals of assets of the kind listed above are treated as no gain/no loss transactions. For this treatment to apply an undertaking as described in Section 31 Inheritance Tax Act 1984 must be given.

The disposal must be either

  • by way of gift, including a gift into settlement, or
  • a deemed disposal by a trustee under TCGA92/S71(1), see CG37100+, but not a deemed disposal on death under section 73 TCGA.

An undertaking under section 258(3) will normally include the following conditions:

  • pre-eminent objects must remain permanently in the UK (apart from temporary absences authorised by HMRC );
  • the asset must be properly maintained and preserved; and
  • the general public must have reasonable access to the asset.

The Specialist PT - IHT - Heritage Team is responsible for agreeing the undertakings.

The asset might have been granted conditional exemption from Inheritance Tax on the current or on some previous occasion (provided that the transfer was not a potentially exempt transfer for the purposes of that tax). If a current undertaking is or has already been given to secure the Inheritance Tax exemption there is no need for a separate undertaking for Capital Gains Tax. If there has been no occasion for the taxpayer to claim the Inheritance Tax exemption it is not necessary to agree an Inheritance Tax undertaking as a condition for agreeing to the Capital Gains Tax relief.

Specialist PT - IHT - Heritage Team will decide which undertakings are necessary and from whom.


Section 258(5) and (6) TCGA: disposal of assets subject to undertakings

The undertaking described in 'section 258(3) and (4) TCGA: no gain/no loss transfers' lasts until the owner dies or the asset is disposed of. If an asset which is subject to an undertaking is disposed of , the Capital Gains Tax consequences are as follows.

  • The asset is given away and the new owner also gives an appropriate undertaking. Relief is available under TCGA92/S258(3), see 'section 258(3) and (4) TCGA: no gain/no loss transfers'.
  • The asset is given away and the new owner does not give the appropriate undertaking or it is disposed of under some other non-arm's length transaction. The disposal is deemed to take place at market value and the gain or loss arising is then calculated in the normal way.
  • The asset is sold and Inheritance Tax is chargeable on that occasion, or would be if an inheritance tax undertaking were in force. TCGA92/S258(5) applies and there is deemed to be a disposal of the asset at market value. Because section 258(5) applies relief is available under TCGA92/S258(8). This provides that Capital Gains Tax payable under this bullet or 'section 258(5) TCGA: breach of undertaking' is deducted in calculating the value of the asset for Inheritance Tax if Inheritance Tax is payable on the same occasion.
  • The asset is sold by private treaty or given to a body listed in Schedule 3 Inheritance Tax Act 1984 - see 'exemption for sales by private treaty to museums etc.'.
  • The asset is accepted by HMRC in lieu of Inheritance Tax - see below.


Section 258(5) TCGA: breach of undertaking

If the Commissioners of HMRC are satisfied that an undertaking has not been observed in a material respect the asset is deemed to have been disposed of and immediately reacquired at its market value. In this situation, the gain or loss arising is calculated in the normal way. Specialist PT - IHT - Heritage Team are responsible for deciding whether any such breach has occurred.


Section 258(2)(a) TCGA: exemption for sales by private treaty to museums etc

Section 258(2)(a) TCGA gives an exemption from Capital Gains Tax on the disposal of:

  • an asset in respect of which an inheritance tax undertaking under Section 31 Inheritance Tax Act 1984 has been, or could be, given, if
  • the disposal is a sale by private treaty, or otherwise than by sale, to
  • one of the bodies listed in Schedule 3 Inheritance Tax Act 1984, see IHTM11224.

If the disposal is a sale the restriction to sales by private treaty means the exemption does not apply to sales at auction. In practice the price paid by the public body will normally be reduced so as to share the benefit of Capital Gains Tax saved with the acquiring body. See 'section s58 TCGA: 'douceur''. For disposals before 6 April 2009 the exemption is given by concession if there has been no prior grant of conditional Inheritance Tax or Estate Duty exemption provided that the price paid by the public body is reduced to share the benefit of the Capital Gains Tax exemption. See 'section s58 TCGA: 'douceur''.


Section 258(2)(b) TCGA: exemption for assets taken in satisfaction of IHT due

Section 258(2)(b) applies the exemption in section 258 to assets which are accepted by HMRC in satisfaction of an Inheritance Tax liability. In practice the amount of Inheritance Tax satisfied by the transfer of the asset is reduced so as to share the benefit of the Capital Gains Tax saved with the nation.


Section 258 TCGA: ‘douceur’

If section 258(2)(a) TCGA 1992 orsection 258(2)(b) TCGA 1992 apply, Specialist PT - IHT Heritage Team may ask you to calculate the Capital Gains Tax which would have been due on a sale in the open market.

The reason for this is because the price paid by the public body or the amount of tax satisfied by the transfer will be reduced to reflect the fact that the disposal is exempt from Capital Gains Tax. The Capital Gains Tax `saved' is shared by the taxpayer and the recipient of the asset. The amount of the tax saving retained by the taxpayer is known as a `douceur'.

Normally, the tax `saved' is shared as follows.

  • In the case of the transfer of land and buildings
  • 90% by the public body (or HMRC if the asset is taken in satisfaction of Inheritance Tax due);
  • 10% by the transferor of the asset.
  • In the case of a transfer of an asset other than land
  • 75% by the public body or HMRC ;
  • 25% by the transferor of the asset.

In order to calculate the douceur it is necessary to know how much Capital Gains Tax which would be payable if the asset was sold for its market value. If Specialist PT - IHT Heritage Team requires advice in any particular case you will be advised of the agreed open market value of the asset and asked to calculate the Capital Gains Tax which would be payable if the asset was sold for that amount. In making the calculation you should allow any reliefs or disposals available against the disposal of the particular asset such as principal private residence relief and the chattels exemption. You do not take account of factors such as losses and the Annual Exempt Amount.


Hold-over relief: other disposals of heritage property

TCGA92/S260

Certain disposals which are not outright gifts, or which do not qualify for relief under TCGA92/S258 for some other reason, are eligible for hold-over relief under TCGA92/S260. Provided that the basic requirements of Section 260 are satisfied, see CG67030+, the following disposals are eligible for relief.

  • Disposals which are exempt transfers for the purposes of Inheritance Tax by virtue of
  • Section 27 Inheritance Tax Act 1984 (transfers to maintenance funds for historic buildings etc),
  • Section 30 Inheritance Tax Act 1984 (transfers of designated property).
  • Disposals to which Section 57A Inheritance Tax Act 1984 applies and as a result of which the property is held on trust in a fund for the maintenance of a historic building.
  • Disposals which, by virtue of Section 78(1) Inheritance Tax Act 1984, are exempt transfers for Inheritance Tax purposes (transfers of works of art).

If hold-over relief under Section 260 is claimed in respect of any of the above kinds of disposal and you are not certain whether the appropriate Inheritance Tax conditions are satisfied, you should refer the case to Specialist PT - IHT for advice. When doing so, you should set out the full facts of the case and indicate the precise Inheritance Tax provision on which the taxpayer is relying.