HMRC internal manual

Inheritance Tax Manual

Land and buildings, machinery and plant: Additional user requirement

IHTA84/S105(1)(d) requires the asset to have been used for the purposes of the business concerned only immediately before the transfer. However under IHTA84/S112(3) the asset is not relevant business property, and so does not qualify for relief, unless either

  1. it was used as set out in IHTA84/S105(1)(d) (IHTM25222) throughout the two years immediately preceding the transfer, or
  2. it replaced another asset so used, provided that the assets (and any earlier replaced assets) were used for at least two of the preceding five years, or
  3. where the successive transfer (IHTM25331) provisions apply, the asset was used continuously between the earlier and subsequent transfers there defined, or throughout the part of that period during which it was owned by the transferor or his spouse or civil partner (IHTM11032), with adaptation where the asset replaced another asset during that period.

The first test above is satisfied where land or buildings used wholly or mainly by a business are used by a company or partnership formed to take over the business, even if its formation was less than two years before the transfer, provided that the total period of use by the business extends to two years or more.