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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
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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 syndicatesThere 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.

Any case in which it is necessary to value an interest in a woodlands syndicate should be referred to TG as soon as the interest comes to light. So far as the syndicate interest is concerned, TG will undertake any technical examination, refer to the DV, and advise on the availability of business relief (IHTM25000).

Ownership of the land and of the timber severed before deathWhere the deceased was not beneficial owner of both the land and the timber at the time of death the relief is not available.

Example

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

  • on A’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 B for the sale of the trees)
  • on B’s death, as the land is not part of his estate, IHTA84/S125 (1) cannot apply. B’s right to the trees under the contract with A has to be included and its value ascertained in accordance with the normal rule under IHTA84/S160.

Interest in unadministered estatesWhere 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 interestsIf a reversionary interest 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.