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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Lifetime transfers: The four additional conditions

Four conditions have to be satisfied for agricultural relief to be available in calculating the (additional) tax chargeable by reason of the transferor’s death within seven years of the transfer. The conditions all operate by reference to the original property (IHTM24174). For original property, other than shares or securities (IHTM24175) within IHTA84/S122 (1), the agricultural property (IHTM24030) must

  • have been owned by the transferee (IHTM24179) throughout the period between the date of the transfer and the death of the transferor, IHTA84/S124A (3)(a) (or earlier death of the transferee, IHTA84/S124A (4)),
  • not be subject to a binding contract for sale (IHTM24040) at the date of death unless relief is preserved by the purchase of qualifying replacement property (IHTM24110), IHTA84/S124A (3)(a)
  • still be agricultural property immediately before the death of the transferor (or earlier death of the transferee), IHTA84/S124A (3)(b) and
  • have been occupied (IHTM24070) (by the transferee or another) for agricultural purposes (IHTM24060) throughout the period between the transfer and the death, IHTA84/S124A (3)(b).

All four conditions must be satisfied, but in applying the third and fourth condition, the transferor’s estate (IHTM24177) is no longer relevant. This can have an impact for example as IHTM24171 where only part of a farm has been transferred, for instance in the example at IHTM24171..

Because the additional conditions operate by reference to the original property, relief would be lost unless the transferee had retained the gifted property and that property was still agricultural property, occupied for agricultural purposes at the date of death. To alleviate this, IHTA84/S124B provides for the additional conditions to be satisfied where the transferee has replaced (IHTM24181) the gifted agricultural property with other qualifying agricultural property.