IHTM24113 - Replacement property: Example of limiting the relief

Example

Frank owns and farms Orchard Farm and has done so for 20 years.

In October 2008, he sells Orchard Farm for £600,000 and buys Manor Farm for £800,000 to increase the scope of his farming operations. Both transactions are at arm바카라 사이트™s length. Both prices are wholly attributable to agricultural value.

In April 2010, Frank dies. Manor Farm then has an agricultural value of £1,000,000. The two year occupation condition in IHTA84/S118 (1) is satisfied.

A practical way to give effect to IHTA84/S118 (3) in such circumstances is to adopt the following apportionment:

  • The agricultural value of Orchard Farm at time of sale (on the facts, the sale price), divided by
  • the agricultural value of Manor Farm at the time of the purchase (on the facts, the purchase price), multiplied by
  • the agricultural value of Manor Farm at date of death or in figures

Or (£600,000 ÷ £800,000) × £1,000,000 = £750,000

The result of this approach is that on A바카라 사이트™s death the agricultural relief on Manor Farm is limited to £750,000. The excess of £250,000 does not qualify for relief. You should ignore the costs of sale and of purchase.

If an alternative approach is suggested, you should seek advice from Technical.