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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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The rate of relief: Tenancies created on or after 1 September 1995 and the higher rate of relief

Land let on new tenancies

IHTA84/S116 (2)(c) (inserted by FA95/S155) states that 100% relief will apply if the interest of the transferor in the property does not carry either of the rights mentioned in paragraph (a) that is

  • the right to vacant possession, or
  • the right to obtain it within 12 months,

because the property is let on a tenancy beginning on or after 1 September 1995.

So, this section will apply for all new tenancies of agricultural land that began on or after 1 September 1995, not just farm business tenancies under the ATA 1995. Further guidance on this point, and an example, can be found at IHTM24241. A succession tenancy granted under the statutory succession scheme in the 1986 Act will be a ‘new’ tenancy for this purpose if it began on or after 1 September 1995. For the purposes of inheritance tax the beginning of the new tenancy is taken to be the date of death of the tenant who has been succeeded, IHTA84/S116 (5B).

Surrender of AHA 1986 tenancy

A tenancy under the 1986 Act may be terminated and a farm business tenancy granted in its place in order to take advantage of the new provisions, particularly in family situations. So long as there has been a clear surrender of the old tenancy (or the necessary notice and counter-notice has taken place to formally determine the old tenancy) there should not be a problem. Further details are contained at IHTM24241. Under the Regulatory Reform (Agricultural Tenancies) (England and Wales) Order 2006 (SI no 2805), from October 2006, new sections were inserted in the 1995 Act to protect most future express and implied surrenders and regrants of 1986 Act tenancies. The result will be to allow for the continuance of the 1986 Act provisions, but also that the regrant will take effect as a ‘new’ tenancy for Inheritance Tax purposes, with potential relief at 100% rather than 50%.

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Gift of tenanted land

In the situation where a gift of tenanted land is made before 1 September 1995 and the transferor dies within seven years, relief would be available at 50%.

If tenanted land has been owned by the transferor since before 10 March 1981 and the transitional provisions (IHTM24145) are satisfied then relief will be available at 100% in any event.