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HMRC internal manual

Shares and Assets Valuation Manual

IHT Agricultural Property Relief: Replacement Provisions (Shares or Securities)

s.123(3) IHTA 1984

Where the shares or securities transferred replaced other eligible property the condition in s.123(1)(b) is treated as satisfied if the shares or securities, the eligible property they replaced and any eligible property directly or indirectly replaced by the other eligible property were owned by the transferor for periods which together comprised

  • for the two years test, at least two years out of the five years ending with the transfer date.
  • for the seven years test, at least seven years out of the ten years ending with the transfer date.

In this context, eligible property means

  • agricultural property owned personally by the transferor (including any such property which may have been transferred to the company in exchange for the shares or securities), or
  • a control holding in another farming company.

s.123(4) and 118(3) and (4)

Where the ownership test is satisfied under the replacement provisions, relief is restricted to what it would have been had the replacement - or any earlier replacement to be taken into account - not been made. These restrictions apply to all replacements except that changes resulting from the formation, alteration or dissolution of a partnership are disregarded.

The restrictions, where applicable, limit relief to the lowest value - that is, of the transferred property, the replaced property, and any earlier replaced property taken into account. For this purpose the value of any replaced property should be ascertained at the time of replacement.

  Additional Guidance: SVM150000