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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Gifts with reservation of benefit: Disposal of gifted property by the donee

To qualify for agricultural relief (or business relief) the donee is generally required to hold the gifted property until the time of the GWR charge, (IHTM24200) FA86/SCH20/para8 (3).

However, where the original property comprised in the gift has been disposed of by the donee and further property acquired in substitution, the later acquired property will be treated as the property comprised in the gift under the tracing provisions, (IHTM14371) FA86/SCH20/para2

But where the original property given by the donor consisted of a control holding of shares and securities in a company with agricultural assets (a holding within IHTA84/S122 (1)) any property acquired in substitution will not qualify for agricultural relief (or business relief) because of the ownership requirement at FA86/SCH20/para8 (3)

Therefore, the tracing provisions (IHTM14371) may apply in respect of agricultural property (IHTM24030) or relevant business property acquired in substitution of the original agricultural property comprised in the gift unless that property is ‘shares or securities’. Advice should be taken on any case where it is claimed that agricultural or business relief should apply in respect of substituted property.