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HMRC internal manual

Shares and Assets Valuation Manual

IHT Business Property Relief: Dealing in land or buildings

The restriction in s.105(3) for dealing in land or buildings does not deny relief for shares in a company which at the time of transfer:

  • is carrying on a genuine building and construction business holding a number of properties (for example, houses or plots awaiting development) as stock in trade.
  • or is a property development company provided:
  1. the land is acquired with a view to the development and disposal of the completed development, and
  2. most of the profit is derived from the enhanced value of the property resulting from the development (as opposed to increases in the value of the land from the obtaining of planning permission or a general rise in land values).

The focus is on the nature of the business at the time of the transfer. So, for example, a business which started as a house builder but which, at the time of the transfer, had not built any houses in recent years and there is, for example, no evidence of reinvestment in a new development and it was selling off its landbank would not quality for relief.

You should take care to identify a building or development company which retains and lets its completed property, as this may, over time, convert the business into one of mainly investment holding. However, you must consider each company individually as it is important to remember, particularly in a period of property slump, there may be little or no development activity and previously completed property may be rented out over a number of years.

Some businesses will be hybrids engaged in both property development and the holding of let properties. You should use the ‘wholly or mainly’ test (IHTM25265) to evaluate whether these businesses are investment businesses.


‘Dealing’ in s.105(3) means dealing as a principal and not as an agent. Thus the normal activities of, for example, estate agents, merchant bankers, and investment advisers are not excluded businesses.

‘Dealing’ is restricted to the 5 categories specified in s.105(3) namely securities, stocks or shares, land or buildings. It does not therefore relate to, for example, commodities or money lending.

Regular dealing in commodities may be accepted as trading and not investment. Where however dealings are only infrequent, you should consult your Grade 7.

  Additional Guidance: SVM150000