Lifetime transfers: specific lifetime reliefs: interests in land: changes that have reduced the value
If the change has the effect of reducing the value of the transferred land, adjust the relief by increasing the market value of the property at the date of death or sale by the difference between
- the market value of the interest in the land at the time of the transfer, and
- what that value would have been if the change had already taken place.
The market value of land is £100,000 at the time of transfer. Between then and the transferor’s death a lease is granted that reduces the market value (IHTM14626) of the land. If the lease had been in existence at the time of transfer the land would then have been worth £60,000. The market value of the land subject to the lease at the date of death is £50,000.
For relief purposes you must increase the date of death value of £50,000 by the difference between £100,000 and £60,000 (£40,000) to become £90,000. The amount of relief due is £10,000. This is the difference between the actual market value of the land at the transfer date (£100,000) and the adjusted value of the land at the date of death (£90,000) under IHTA/S137(1).
Where compensation becomes payable in connection with the reduction in value of the interest in land you must follow the further instructions at IHTM14664.