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HMRC internal manual

Inheritance Tax Manual

Other issues: Milk quotas

The aim of the Milk Quota (MQ) System, introduced on 2 April 1984, was to limit the supply of milk within the European Union. MQ may be described as a producer’s right to sell a fixed number of litres of milk a year without having to pay a levy and was allocated to producers by reference to the land used by them. In this context the term ‘producer’ embraces

  • an individual
  • a partnership; or
  • a company farming as freeholder or under a tenancy or licence.

Milk Quota is not an interest in land as such, following the decision in Cottle v Coldicott (1995) SpC 40. It may be bought separately from land and may be valued as a separate asset. Following the introduction of Milk Quota, a market developed in the separate sale and leasing of Quota. Initially Milk Quota acquired a substantial value for both sale and lease, due to the fact that national quota was pitched at a level designed to reduce production and in the early 1990s milk prices were rising. At the peak of the market prices for Milk Quota for sale reached 80p per litre and leasing reached 12p per litre.

However, subsequently milk prices fell following deregulation and abolition of the Milk Marketing Board, and as a result a substantial number of producers ceased dairy production. As a consequence the value of Milk Quota for sale has fallen below 1p per litre and to lease below 1/10 of 1p per litre. Currently the EU intend to abolish Milk Quota at its next review in 2015. In 2008 the EU added a further 2% to national Milk Quotas insuring supply currently totally outweighs demand.

However for historic valuation dates the value of Milk Quota can still be significant and therefore needs to be included as an asset of an estate or one of the assets of a Dairy Farming Company, Partnership or Sole business.

Where an owner uses his land for a dairy farm, you should value MQ as part of the land and allow agricultural relief on the full combined value if the land itself qualifies for relief. Business relief is likely to be available in the alternative so the precise nature of the relief and its apportionment is not relevant.

The position is different where the property in the deceased’s/transferor’s estate is the freehold interest in land subject to a tenancy. In this situation, if the tenant has a dairy farm with milk quota, it is likely that the existence of the quota will be reflected in the value of the freehold interest in the land. Subject to the other conditions for relief being satisfied, you may allow agricultural relief on the value of the freehold interest as enhanced by the existence of MQ.

Milk Quota is not strictly tied to land. It can be the subject of an agreement to Transfer Quota permanently from one producer to another either with, or without land. Following the European Court of Justice’s Decision in 2002 in the Thomsen case non-producing ex Dairy Farmers are not permitted to Lease out Quota. Where Quota is reverting to a non-producing Landlord at the end of a Tenancy it will be necessary for the non-producing Landlord to prove either that he will be resuming Milk production himself or the Quota is to be transferred to another producer at the earliest opportunity.

If you need to obtain a value for Milk Quota you should follow the instruction at IHTM24251.


If the landlord’s interest in tenanted land has been valued to include MQ, agricultural relief should be available. Alternatively if the quota has been separately valued to arrive at a deceased tenant’s interest under a lease, business relief may be available.