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HMRC internal manual

Inheritance Tax Manual

Grant of an agricultural tenancy

IHTA84/S16 applies to the grant of a tenancy of agricultural property (IHTM24000). The grant is not a transfer of value (IHTM04024) if three conditions are satisfied.  The conditions are the

  • tenancy is for agricultural purposes (IHTM24060)
  • tenancy is granted for full consideration in money or money’s worth,
  • property is in the United Kingdom, Channel Islands or the Isle of Man.

The grant of an agricultural tenancy is rarely reported to this office. If your investigations suggest that a tenancy may have been granted, you should

  • find out when, how and in whose favour the grant was made, and
  • on receipt of the information, refer the case to Technical.

Settled property

Under IHTA84/S52 (3), IHTA84/S16 can be relevant in considering transactions between trustees and beneficiaries which reduce the value of settled property. (IHTM04086)

Example

Settled property is held on trust for Angus for life, but subject to powers of advancement to the members of a class of remaindermen. The trustees purchase agricultural property with vacant possession and then grant an agricultural tenancy to a member of the class. 

So it is a transaction within IHTA84/S52 (3) which, subject to the subsection’s proviso, potentially gives rise to a IHTA84/S52 (1) charge if Angus dies within 7 years. The effect of the proviso is to import IHTA84/S16 to prevent that potential charge if the tenancy is granted for full consideration.

The provisions of IHTA84/S16 may also apply to charges arising on any of the special trusts (IHTM04098) through IHTA84/S70 (4).