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HMRC internal manual

Shares and Assets Valuation Manual

IHT Agricultural Property Relief: Company occupation / ownership tests

s.123(1)(a) IHTA 1984

AR is only available for agricultural property which was either:

  • occupied by the company for the purposes of agriculture throughout the period of two years ending with the date of the transfer (the occupation test) or
  • owned by the company throughout the period of seven years ending with that date and throughout that period occupied (by the company or another) for the purposes of agriculture (the ownership test).

In strictness the occupation or ownership must be by the company in which the shares or securities are held. Occupation or ownership by a subsidiary should be referred to the Litigation and Technical Advice Team (LTAT).

The purpose of these tests is to prevent exploitation of the relief by a company switching into agricultural property shortly before death or a transfer.

For further information see Chapter 24 of the Inheritance Tax manual at IHTM24090 onwards (occupation) and IHTM24100 onwards (ownership).

There are additional requirements

  • for PETs which become chargeable (see SVM112140 onwards) or
  • when further tax becomes payable on a lifetime transfer chargeable when made as a result of the transferor’s death within seven years (see SVM112140 onwards).
  • for gifts with reservation (see Chapter 24 of the Inheritance Tax manual at IHTM24200 onwards).

For the purposes of agriculture

For the meaning of ‘agriculture’ see SVM112050

Whether land is occupied for agricultural purposes depends on all the facts of the case. Land which is principally used for purposes other than agriculture (for example a grouse moor) may be used occasionally for agricultural purposes. Such occasional use does not enable the land to be treated as occupied for the purposes of agriculture within the meaning of s.123(1)(a).

Where the agents claim relief and the occupation is not clearly agricultural, you should ask for a full statement of the facts and grounds on which they consider the occupation to be for agricultural purposes. In considering the information given, you may usefully refer to cases on the meaning of “occupation for agricultural purposes” in other contexts. However, you should recognise that the cases are not direct authorities on the meaning of the expression as used in s.123(1)(a). There is a good review of authorities in Assessor for Lothian Region v Rolawn Ltd [1990] SLT 433.

  Additional Guidance: SVM150000