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HMRC internal manual

Inheritance Tax Manual

Occupation: When is property occupied?

The test of occupation is factual and so

  • a person who farms a property is in occupation.
  • in connection with partnerships in England, Wales and Northern Ireland, each partner is in ‘occupation’ of the whole land farmed by the partnership
  • in connection with a Scottish partnership, under IHTA84/S119 (2), occupation by a Scottish partnership is treated as occupation by the partners
  • under IHTA84/S119 (1), occupation by a company controlled by the deceased/transferor is treated as occupation by the deceased/transferor. ‘Control’ is defined by IHTA84/S269. You should ask SAV to advise whether the deceased/transferor had control
  • where the deceased/transferor farms settled agricultural property in which they have an interest in possession (IHTM16062) for their own benefit, they are treated as occupying the property. This is very important as it is the life tenant who is the transferor for the purpose of the charge to tax when their life interest comes to an end (IHTM04083).

The Finance Act 2006 made a number of fundamental changes to the Inheritance Tax treatment of trusts. Where a person becomes beneficially entitled to an interest in possession (IHTM16061) on or after 22 March 2006, the interest will only be treated as forming part of their estate for IHT purposes if it is an Immediate Post Death Interest, a Disabled Person’s Interest, or a Transitional Serial Interest.

Trustees who employ a farm manager and who take the profits (or bear the losses) of a farming enterprise are in occupation.

There are more examples of circumstances when a person is not in occupation at . (IHTM24083)