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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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The District Valuer: Investigation of character appropriate before the VOA referral

While the District Valuer will always consider whether or not a property satisfies IHTA1984/S115 (2) caseworkers must also consider whether the character appropriate (IHTM24050) issue may be relevant, before the papers are sent to the District Valuer. If investigations highlight that character appropriate may be an issue, a covering memo should be sent to the District Valuer detailing why this is the case. IHTM24051 outlines the most common situations where it is possible that a farmhouse (IHTM24036) or cottage (IHTM24034) may not qualify as agricultural property (IHTM24030) as well as details of what tests Technical will consider when reaching a decision on character appropriate.

In any case where you do not know the size of any farmhouse or cottage on which agricultural relief has been deducted to get brief details before you make your referral to the District Valuer. However, you should also balance this against the need not to delay making a referral.

If you can obtain information about the farmhouse or cottage before you make your referral to the DV you can consider whether or not ‘character appropriate’ (IHTM24050) may be an issue. If it is, then at the same time you ask the DV whether or not an interim report (IHTM24164) is required, you should request photographs of the property in question from the taxpayers or their agents.

The District Valuer will alert us to the possibility that a farmhouse or cottage may not satisfy the requirements of IHTA84/S115 (2) by issuing an interim report (IHTM24164). The decision on whether or not relief is available on such property rests with Technical.

Details of what land should be included are set out above. We are responsible for establishing the extent of all agricultural property to be taken into account.

Land let away to a third party

When you are identifying the total extent of the agricultural property, you need to consider all the agricultural land and pasture in the estate, including land that is let away. When part of the land is let away you will need to consider the application of IHTA84/S115 (2).

  • When all the agricultural land is let away the deceased’s house will probably no longer be a ‘farmhouse’. (IHTM24036)
  • When only part of the land is let away the house may still be a farmhouse (IHTM24036) but it will not be ‘the farmhouse’ (IHTM24036) for the land let away.
  • If part of the land is let away this is a negative factor in determining whether the farmhouse (IHTM24036) is of a character appropriate (IHTM24050) to the agricultural land in the estate. For example, a farmhouse may be ‘appropriate’ for land of 150 acres, all of which was in hand, but not if 100 acres were let away. The terms on which the land is let, the duration of the unexpired term at the date of death or transfer and the potential for the deceased or transferor to resume possession (and/or evidence of an intention to do so) may also be relevant factors. So, in such cases, you should ensure that your referral to the DV includes full details of the size of the total land held and of the land let away, and of the tenancies under which the let land is held. You must obtain full details of any tenancies, before any referral is made to the District Valuer.

If an Interim AR Report (IHTM24164) is necessary the DV will advise whether the fact that part of the agricultural land in the estate is let away, is a material factor in judging whether the farmhouse or other farm building is ‘of a character appropriate’. (IHTM24050)