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HMRC internal manual

Inheritance Tax Manual

Overview of agricultural relief: outline of the relief

For a transfer to attract agricultural relief

  • it must be attributable, at least in part, to the agricultural value (IHTM24150) of agricultural property that is situated in the United Kingdom, Channels Islands or Isle of Man or a state other than the United Kingdom which is within the European Economic Area (IHTM24256) at the time of the transfer of value IHTA84/S115 (5),
  • the agricultural property must not be subject to a binding contract for sale (IHTM24040)
  • the ownership (IHTM24100) or occupation (IHTM24070) conditions must be satisfied,

If the transfer of value is a failed PET (IHTM14512) the additional conditions (IHTM24172) must also be satisfied to calculate

  • the value transferred, and.
  • (for immediately chargeable transfers) the additional tax payable because of the transferor’s death within seven years of the transfer (IHTM14571).

When tax is charged under the GWR provisions (IHTM24200) there are additional conditions that must be met for agricultural relief to apply. The conditions are there to prevent exploitation of the relief by a person switching their assets into agricultural property shortly before death or making a transfer. However, to prevent the conditions from operating unfairly they are relaxed in three types of situation. These are:

  • where the property transferred replaced other relievable property, IHTA84/S118 (IHTM24110)
  • where the transferor became entitled to the property on a death, IHTA84/S120, (IHTM24121)
  • where the property transferred had been acquired on an earlier transfer within the relevant period, IHTA84/S121 (IHTM24131).

Agricultural relief is also available for control holdings (IHTM30217) of shares or securities, IHTA84/S122 & IHTA84/S123 to the extent that their value is attributable to the agricultural value of agricultural property. SAV will decide whether the relief is due and report the necessary value and the rate of relief. Where the relief is given on a transfer on death SAV may need to withdraw relief they have already given where:

  • the shares are sold within three years of the death (IHTM24021), IHTA84/S122 (2) and
  • they are revalued as a minority holding (IHTM09761) under IHTA84/S176 .