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HMRC internal manual

Inheritance Tax Manual

Woodlands: beneficial entitlement under special types of interest

For relief to be available, it is a basic requirement of IHTA84/S125 that the deceased had a direct beneficial interest in the land on which the trees or underwood are growing.

Partnership and woodlands syndicates

There are two different situations to consider

  • where the woodlands are part of the partnership assets, and
  • woodlands syndicates.

Where the asset included in the deceased’s estate is a partnership interest, the deceased may be treated as beneficially entitled to the property where they were a beneficial owner of a share of the partnership assets, including any land on which trees or underwood are growing. An interest in a Scottish partnership should also be treated as fulfilling these conditions. However, a shareholder in a company whose assets include woodlands will not obtain relief, since under company law, shareholders are not beneficially entitled to the assets of the company in which they hold shares.

If you have a case in which it is necessary to value an interest in a woodlands syndicate review the guidance at IHTM25251 as Business Relief may be available instead of woodlands relief.

Ownership of the land and of the timber severed before death

Where the deceased was not beneficial owner of both the land and the timber at the time of death the relief is not available.

Example

Desmond owns Blackacre on which trees are grown as a commercial crop. He sells the trees, but not the land, to Ellen. They both die before the trees are felled. Woodlands relief is not available on either death

  • on Desmond’s death, though his estate includes the land on which the trees are growing, the trees are not part of his estate (but his estate does include any remaining value in the contract with Ellen for the sale of the trees)
  • on Ellen’s death, as the land is not part of her estate, IHTA84/S125 (1) cannot apply. Her right to the trees under the contract with Desmond has to be included and its value ascertained in accordance with the normal rule under IHTA84/S160.

Interest in unadministered estates

Where an unadministered residuary estate (IHTM22025) includes land on which trees or underwood are growing, a residuary beneficiary is treated as owning the land, or an appropriate share of it, IHTA84/S91.

Reversionary interests

If a reversionary interest (IHTM16231) is not excluded property

  • including it as part of the estate will stop the provisions of IHTA84/S126 running in relation to the earlier death insofar as the land is involved on each death
  • but the relief is only available, in view of IHTA84/S125 (1), if the deceased can be said to have an interest in the assets themselves rather than the reversion as an item of property.