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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Gifts with reservation: Replacement property

In general, relief is available only where relevant business property (IHTM25141) disposed of by the donor in his lifetime is retained in the hands of the donee.

However, complicated rules apply where the donee has sold the original property and used the proceeds to buy other assets which would, on a notional transfer of value by the donee immediately before the donor’s death, qualify for business relief (apart from the ownership tests).

You should refer to Technical any case in which the parties contend that, although the original property has been disposed of before the donor’s death, the relief is preserved by the purchase of qualifying replacement property.