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HMRC internal manual

Inheritance Tax Manual

Special valuation matters: agricultural land occupied by a partnership

Before you apply the following instructions, you need to consider whether available exemptions or reliefs make detailed investigation unnecessary. There are different procedures depending on whether the land was situated in England and Wales, Scotland or in Northern Ireland.

(a) Land situated in England and Wales

  • Where agricultural land (IHTM24031) owned by the deceased was occupied by a partnership (IHTM25101) (whether or not the partnership terminated on the death) and a value subject to that occupation is offered, you should review the IHT400 (IHTM10021) or other account and any accompanying schedules to establish the nature and terms of the partners’ occupation of the land before reference (IHTM23031) is made to the VOA (IHTM23002).
  • You may therefore need to ask the taxpayer to

    • state the terms on which the partnership occupies the land
    • state how these terms are evidenced, and
    • produce any such documentary evidence
  • You should bear in mind that, if granted before 1 March 1948, neither a licence to occupy the land nor a tenancy at will is within the protection of the Agricultural Holdings Acts (IHTM24220). Neither is a letting or licence of the use of the land for grazing or mowing (IHTM24073) during some specified period of the year irrespective of when granted.
  • The distinction between a tenancy and a licence (IHTM24074) turns on the question of whether there was the intention between the parties to create the relationship of the landlord and tenant; generally speaking, this intention should be plain from the express terms of the agreement. It is not necessary that the agreement be in writing.
  • The object of any enquiries is to obtain the basic facts as quickly as possible and pass them to the VOA
  • If the evidence produced clearly indicates that there is a tenancy of the agricultural land protected under the Agricultural Holdings Acts and the related property (IHTM09731) provisions of IHTA84/S161) do not apply you should instruct the VOA to value the land subject to that tenancy.

In general, you should not give instructions to the VOA until the position is clear and agreed. However, if your Team Leader agrees you may ask the VOA to comment from his local knowledge.

If the question of whether the property is subject to a tenancy

  • becomes contentious, or
  • has not been resolved within twelve months of being raised

you should refer the matter to TG

In all cases, you should send copies of the relevant correspondence and documents to the VOA at the time the reference is made.

  • Where the deceased had an interest in the partnership occupying the land, in the light of Gray v IRC [1994) STC 360 and Walton v IRC [1996) STC 68, the value of a partnership’s agricultural tenancy should in appropriate cases be reflected in the value of a partner’s estate at the date of death. (The corollary of this is that the loss to the transferor’s estate on the chargeable grant of such a tenancy would be reduced by the value to the transferor of his interest in the tenancy as a partner.)
  • You should ensure that the existence of a tenancy in a partnership is fully investigated (a deduction for rent in partnership accounts for example may indicate the possibility of a tenancy), and obtain details of all tenancies held by the partnership with copies of any written agreement.
  • You should refer all cases in which the deceased was a partner in a farming business with an agricultural tenancy irrespective of the landlord to TG unless

    • there is no claim on the deceased’s death in respect of the partnership interest, or
    • the value of the deceased’s interest is not to be ascertained by reference to the partnership assets.

(b) Land situated in Scotland

  • where the land is in Scotland the case should be referred to a Team Leader

(c) Land situated in Northern Ireland

  • Virtually all agricultural land in Northern Ireland is registered freehold. Agricultural tenancies are extremely rare.