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HMRC internal manual

Inheritance Tax Manual

The rate of relief: Vacant possession and the higher rate of relief example of occupation by a company

Where an individual is the sole owner of agricultural property (IHTM24030) and occupies the land for agricultural purposes as a sole trader (IHTM24151) they will be entitled to give vacant possession of the land and will qualify for relief at the higher rate.

A beneficial joint tenant or tenant in common (in Scotland, a joint owner or owner in common) is regarded under IHTA84/S116 (6) as having the right to vacant possession if his interest in the property and the similar interests of all the other co-owners together carry that right.

Before s155 Finance Act 1995 introduced the higher rate of relief on tenancies created on or after 1 September 1995 (IHTM24240) it was not uncommon to see it claimed that an agricultural tenancy (IHTM24210) did not exist on cases where the land was occupied

  • by a partnership (whether the deceased was a member or not), or
  • by a company controlled by them, or
  • by a third party

So vacant possession was obtainable and relief at 100% rather than 50% was sought - In any such case you should investigate whether an agricultural tenancy did exist, unless you have evidence that the land was subject to grass keep lettings (IHTM24142) for less than a year at a time.

Evidence of tenancies may be obtainable from Articles of Partnership, from the files of previous owners, for examples a predeceased spouse or civil partner (IHTM11032), from deductions for rent in business accounts, or returns of rental income in the deceased’s Income Tax papers.