IHTM24113 - Replacement property: Example of limiting the relief
Example
A owns and farms Orchard Farm and has done so for a number
of years.
In October 1988, A sells Blackacre for £600,000 and
buys Manor Farm for £800,000 to increase the scope of his
farming operations. Both transactions are at arm’s length.
Both prices are wholly attributable to agricultural value.
In April 1990, A 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
| Agricultural value of Orchard Farm at time of sale (on the facts, the sale price) | X | Agricultural value of Manor Farm at date of deathor in figures |
| agricultural value of Manor Farm at the time of the purchase (on the facts, the purchase price) |
| £600,000 | x £1,000,000 | = £750,000 |
| £800,000 |
The result on this approach is that on A’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.
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
