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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
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Sales of related property, etc: what the relief does

If the conditions (IHTM09754) for relief are satisfied then the sold property (IHTM04030) may be re-valued at the date of death without taking into account the related property (IHTM09733) or property passing under another title (IHTM09712), with which it was originally valued.

But this does not necessarily mean that the property has to be valued by itself. You must still value the property with any other property in the estate which is vested in the vendors, or has been vested with them at any time since the death if it is appropriate to do so on normal valuation grounds.

Example

On death, A’s estate includes the freehold interest in Blackacre, which is leased to his wife.

The value of Blackacre immediately before A’s death is £50,000. The values of the freehold and leasehold interests are £30,000 and £10,000 respectively.

The value of A’s interest under the related property provisions is

(£30,000 ÷ £40,000) x £50,000     = £37,500

The freehold is later sold and all conditions for relief are satisfied. Under IHTA84/S176 the value immediately before death is revised to £30,000.