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HMRC internal manual

Inheritance Tax Manual

Loss on sale of land: sales excluded from relief: non-qualifying sales

Under IHTA84/S191 (3) a sale is excluded from the relief (whether it results in a loss or a gain) if the sale is made by a personal representative (IHTM05000) or trustee (IHTM16050) to:

  • a person who has at any time between the death and the sale been beneficially entitled to the property (or to an interest in possession in the property) comprising the interest (IHTM33082) sold
  • the spouse or civil partner (IHTM11032), child or remoter descendent of such a person, or
  • the trustees of settlement under which that person (or the spouse or civil partner, and child or remoter descendant of that person) has an interest in possession in property comprising the interest sold.

(For this purpose ‘child’ does not include an illegitimate child or a step-child.)

But not all sales to beneficiaries are excluded (IHTM33082) from relief. Also a sale to a family company, which has any of the people listed above amongst its shareholders, or to trustees of a discretionary trust, which has such people as its objects is acceptable.

A sale is also excluded if, in connection with the sale, the vendor (or any of the persons listed above) obtains a right to acquire either

  • the interest sold, or
  • some other interest in the land.

In some circumstances a non-qualifying sale can lead to an adjustment in the sale price (IHTM33141) of qualifying sales.

You should normally assume that sale is a qualifying sale unless the taxpayers answer questions 1 and 8 on the form IHT38 ‘Yes’ or unless you have evidence to suggest that the above conditions apply.