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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Loss on sale of land: non-qualifying sales: exchanges

You will need to adjust the sale price (IHTM33072)

  • if there has been an exchange of land with or without an equality payment, and
  • the market value at the date of exchange exceeds the value at the date of death (IHTM33100), IHTA84/S196.

The same principles apply to these exchanges as apply to adjustments for non-qualifying sales (IHTM33141). If the claim relates to one qualifying sale only, that qualifying sale price is increased by the amount of the excess of the market value of the exchanged property over its value on death.

If there is more than one qualifying sale the excess must be appointed between them according to their respective losses (or gains) on sale using the ‘appropriate fraction’ (IHTM33141) used for adjustments for non-qualifying sales. The example at (IHTM33141) would therefore apply if The Barns had been the subject of an exchange at a time when the market value was £55,000, (£5,000 above the date of death value).

The VOA (IHTM23000) should be asked to agree the market value of the exchanged land at the date of exchange. This market value should then be used to adjust the qualifying sale values as explained above.