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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
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Lifetime transfers: Additional conditions

The additional conditions for deciding whether agricultural relief is due on lifetime transfers made on or after 18 March 1986 and within seven years of the transferor’s death are contained in IHTA84/S124A and IHTA84/S124B. The conditions are designed to deny relief in connection with charges arising on the transferor’s death if, very broadly,

  • the transferee has disposed of the agricultural property without replacement
  • it is no longer used for agricultural purposes, or
  • it is not agricultural property at date of death.

As the name suggests, the conditions are additional, so it is essential that,

  • where the transfer is a failed PET (IHTM04057), it would have qualified for relief at the time it was made, and
  • where the transfer was immediately chargeable (IHTM04067), that it did then qualify for relief.

The conditions affect

  • the value transferred by a PET (IHTM04057), IHTA84/S124A (1) and
  • the additional tax payable on an immediately chargeable transfer (IHTM04067) following the transferor’s death within seven years of the transfer, IHTA84/S124A (2).

The additional conditions do not apply to gifts with reservation (IHTM04071) where the reservation was still in existence at the date of death because there are separate rules (IHTM24200) that apply to this type of gift. But they will apply where the gift has ceased to be one with reservation so that the donor is treated is having made a deemed PET (IHTM04064) during their lifetime.

The rate of relief (IHTM24140) (whether the higher or lower rate) and the value on which it is given are determined by reference to the original gift and the position at that time. But if the value of the rate of relief has changed, as it did it 1992, it is the rate at the date of death that applies.

Example

A owns and farms The Willows. In 1989 A gives The Willows and his farming business to his son B who continues the farming business. The transfer is a PET. The conditions for relief at the higher rate, then 50%, are satisfied at the time of the transfer.

In 1993 B stops farming and lets The Willows.

In 1994 A dies. The PET becomes chargeable. B still owns The Willows at A’s death. The additional conditions for relief are satisfied. (IHTM24173). So the PET qualifies for relief.

Though The Willows was let at A’s death, relief is at the higher rate because that was the rate appropriate at the time of the transfer. The higher rate applicable is that at the time of A’s death, not the date of the transfer. So the PET of The Willows qualifies for relief at 100%.