Introduction: introduction to agricultural relief
Essentially, agricultural relief is available on the:-
- agricultural value, IHTA84/S115(3) (IHTM24150) of
- agricultural property, IHTA84/S115(2) (IHTM24030 to IHTM24039)
- owned (IHTM24100) and occupied (IHTM24070) for the purposes of agriculture. IHTA84/S117, for the required period (IHTM24071).
Section 116(1) of the IHTA84 states that ‘agricultural relief is due to the extent that the value transferred by a transfer of value (IHTM04024) is attributable to the agricultural value (IHTM24150) of agricultural property ’(IHTM24030). In this case, transfer of value has its extended meaning under IHTA84/S3 (4), so the relief is available on deemed transfers of value (IHTM04025).
The relief is also available on discretionary trusts under IHTA84/S115 (1), under which a transfer of value includes an occasion on which tax is chargeable on discretionary trusts (IHTM04096) and references to the value transferred by a transfer of value’ and ‘the transferor’ will include, respectively:
- the amount on which tax is then chargeable
- the trustees of the settlement concerned.
The relief is not available on other occasions of charge, such as when conditionally exempt property is subject to a recapture charge (IHTM04112).
The relief is given by a percentage reduction (IHTM24140) in the value transferred by the transfer of value. This means that the relief is
- allowed before the deduction of exemptions, (IHTM04022) or
- given before any deduction is allowed under IHTA84/S165 for other tax borne by the donee (IHTM14013), and
- calculated before any grossing up, (IHTM26071).
Specifically, it does not reduce the value of the property concerned for IHT purposes so that:
- an express provision, IHTA84/S39A, is included to establish the relationship between the value of the property and the value transferred for the purpose of quantifying the spouse or civil partner exemption (IHTM11031), and
- no reduction is made in the ‘historic’ value of property taken into account in determining the rate of tax chargeable in the relevant property trust regime.
There are detailed instructions about the allocation of exemptions at IHTM26101
In the context of relevant property trusts, references to the value transferred by a transfer of value are construed as including references to the amount on which tax is chargeable. So, in the unlikely event of there being a partially exempt occasion of charge in the relevant property trust regime, the exemption is deducted before the reliefs are allowed.