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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
  • a company farming as freeholder or under a tenancy or licence.

MQ ended on 31 March 2015. However for historic valuation dates the value of MQ might still be significant and in those cases 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 used 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 was the freehold interest in land subject to a tenancy. In this situation, if the tenant had a dairy farm with MQ, 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.

MQ was not strictly tied to land. It could 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 were not permitted to lease out MQ. Where MQ reverted 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 resumed milk production himself or the MQ was transferred to another producer at the earliest opportunity.

If you need to obtain a value for MQ 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.