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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Pre-owned assets: property in charge: the disposal condition - land

The disposal condition is met if the chargeable person, at any time after 17 March 1986, owned an interest in

  • the relevant land, FA04/Sch15/Para 3(2)(a)(i), or
  • other property which was disposed of where the proceeds were (either directly or indirectly) applied by another person towards the cost of acquiring the relevant land, FA04/Sch15/Para 3(2)(a)(ii), and

then disposed of all or part of their interest in the relevant land, otherwise than by an excluded transaction (IHTM44030), FA04/Sch15/Para 3(2)(b).

FA04/Sch15/Para 3(2)(a)(i) combined with FA04/Sch15/Para 3(2)(b) covers situations where the individual previously owned and disposed of the land, but continued to occupy it.

FA04/Sch15/Para 3(2)(a)(ii) combined with FA04/Sch15/Para 3(2)(b) covers situations where the relevant land was acquired by someone else using the proceeds from a disposal of property previously owned by the individual, who then occupies the land concerned.


Trevor gives The Paddocks to Paul. Paul then sells The Paddocks and buys Whiteacre with the proceeds. Trevor then occupies Whiteacre. The disposal condition is met.

So the disposal condition will apply to the chargeable person’s occupation or use of the property even if that property was never actually owned by them. If they give away other property (it does not have to be land, but see the contribution condition (IHTM44005) if the gift is of cash) to another person who then sells such property and uses the proceeds to buy the relevant land, the disposal condition is satisfied, unless it qualifies as an excluded transaction.

A disposition that creates a new interest in land out of an existing interest is taken to be a disposal of part of the existing interest, FA04/Sch15/Para 3(4).

The disposal condition will be met whether the sale or gift is of the whole or part of land and whether or not the sale is at less than the full market value. See IHTM44031 where the disposal is of the whole of the land for full consideration.

FA04/Sch15/Para 3(2)(a)(ii) applies where the proceeds of sale are used to acquire land that is subsequently occupied by the chargeable person. So, in the example above, if Paul exchanged The Paddocks for Whiteacre, on the face of it the disposal condition is not met; but see IHTM44005.