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HMRC internal manual

Shares and Assets Valuation Manual

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HM Revenue & Customs
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IHT Agricultural Property Relief: Effect of failure to satisfy the additional conditions

s.124A(5) IHTA 1984

Where the additional conditions are satisfied as regards part only of the gifted property and not satisfied as regards the remainder, a proportionate part of the value transferred is reduced.

Additional conditions not satisfied - even in part

Where the additional conditions in s.124A are not satisfied, the consequences depend on whether the transfer is a

  • failed PET or
  • was chargeable when made.

Failed PET - additional conditions not satisfied - even in part

s.124A(1)

For all purposes - primarily the tax payable on the transfer and the transferor’s cumulative total - there is no AR.

However, s.114(1) does not exclude BR in the alternative if the conditions for that relief are satisfied, in other words

  • if the value transferred satisfied the conditions for BR in ss.103 - 113 at the time of the transfer

and

  • the additional conditions in s.113A (and s.113B if appropriate) are satisfied.

 

Transfer chargeable when made - Additional conditions not satisfied - even in part

Additional tax chargeable by reason of the transferor’s death is to be calculated on the basis of no AR. Consequently:

  1. s.124A(2), the additional tax payable by reason of the death is the difference between tax at death rates on the unreduced value and the tax paid at lifetime rates on the reduced value (the death tax is after taper relief where the transfer was made more than three years before the death)

and

  1. the value transferred by the transfer for the purposes of cumulation is not affected - it remains as established for the purposes of the tax chargeable when the transfer was made.

As the value transferred remains as established for the purposes of the tax chargeable when the transfer was made, in other words after Agricultural Relief, s.114(1) ensures that Business Relief is not available in the alternative.

  Additional Guidance: SVM150000