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HMRC internal manual

Inheritance Tax Manual

Loss on sale of land: changes in the interest or underlying land: where revaluation is for less than the death value

Where a change in the interest has occurred the interest has to be revalued as at the death on the assumption that the change had occurred before the death, IHTA84/S193. If this revised value is less then the actual date of death value (IHTM33100) IHTA84/S193(1), an addition must be made to the sale price (IHTM33072) of the interest in land. The amount of the addition is equal to the difference between

  • the value on death of the interest, and
  • what the value would have been if the circumstances that applied at the date of sale had applied immediately before the death.

Example

At the date of death the market value of a parcel of land is £12,000.

Within the four year period after the death a depreciatory lease is granted. If this had existed at the date of death the land would have been worth £7,000.

The sale price, subject to the lease, is £5,000.

For relief purposes the sale price of £5,000 is increased by £5,000 (£12,000 - £7,000) to £10,000. 

In such cases you should ask the VOA (IHTM23185) to agree the value of the interest at the date of death on the assumption that the circumstances prevailing at the date of sale (IHTM33071) had applied immediately before the death. You should then adjust the sale price as shown above to work out the sale value (IHTM33073).