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HMRC internal manual

Inheritance Tax Manual

Special valuation matters: land subject to a binding contract for sale at the date of death

If a person dies

  • after entering into a binding contract for sale of his property; but
  • before the completion of the conveyance

the deceased’s interest at the date of death was in the proceeds of sale rather than the land itself. This is because their right in the property has been converted into the right to receive the balance of the purchase money. The balance of the purchase money therefore is a taxable asset of the estate.

Normally no reference to the VOA (IHTM23002) is necessary in these circumstances.

However, you should look out for sales to relatives, sales at less than arms length and options involving unquoted companies in which the deceased or his family held shares. Refer to your Team Leader if you suspect anything unusual. Where the creation of the contract warrants investigation you may need to consult the VOA to ensure that the agreed sale price was an open market value.

Where the sale was of joint property (IHTM15011), no discount of the proceeds of sale should be allowed.