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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Pre-owned assets: calculation of the charge on land: where the chargeable person contributed to the acquisition of the relevant property

Where the contribution condition (IHTM44005) is met because the chargeable person has contributed directly or indirectly to the acquisition of the relevant property, the appropriate rental value is found by reference to the proportion of the value of the relevant property that can be reasonably attributed to the consideration provided.

Where the contribution is a direct contribution to the acquisition of the property occupied by the chargeable person, the calculation of the appropriate rental value is likely to be straightforward being the proportion that the contribution bears to the purchase price. Where the contribution is indirect, it may be much more difficult to establish the extent to which the value of the relevant land can be reasonably attributed to the contribution made by the chargeable person.

Example

James gives his son Robert £100,000 and together with £50,000 of his own money Robert invests the money in listed shares. After a number of years, Robert sells the shares for £300,000 and uses the money to buy a property for James to occupy. At first glance, it is not unreasonable to take the view that two thirds of the appropriate rental value should be subject to the POA charge. However, the taxpayer may seek to take other factors into account where, say, certain shares that can be identified as purchased with Robert’s money have outperformed others, so that a greater proportion of the £300,000 is attributable to the funds Robert provided. There can be no hard and fast rule as the legislation refers only to a reasonable attribution, so each case will need to be decided on its own facts.