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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Loss on sale of land: sales excluded from relief: compulsory purchase

Under IHTA84/S197 relief is available where

  • an interest in land is acquired from the appropriate person
  • more than three years after the death
  • by an authority possessing powers of compulsory acquisition.

For a sale made outside the three-year period to qualify for relief it must meet the following conditions:

  • the interest concerned must be sold:

    • to an authority that possesses compulsory purchase powers,
    • following a notice to treat that was served either before or after the death but within the three year period, IHT A84/S197 (1). As long as a notice to treat had been issued it does not matter if the sale was by agreement rather than by compulsory purchase.
  • the sale results in a loss, IHTA84/S197 (2). In other words, the sale price (IHTM33072), after any adjustments (IHTM33111) is less than the value at the date of death (IHTM33100).

This means that a sale by compulsory purchase outside the three-year period can only increase the amount of provisional relief given. You do not need to include a sale at more than the date of death value and you will not need to keep a case open just in case such a sale takes place.

Under IHTA84/S198 (4) an acquisition under a general vesting declaration (or in Northern Ireland, a vesting order) should be treated in the same way where the operative date (as distinct from the date the declaration or order is made) falls outside the three-year period. This should not be extended to any other form of ‘deemed notice to treat’ such as a ‘blight notice’ served by the owner of property that is adversely affected by planning proposals.

You should refer all claims for relief where there is a compulsory purchase to Technical in the first instance.