IHTM38124 - Land charges: effect of a land charge

Although before FA 1999 a charge on the free estate could only be applied to realty, any tax unpaid in respect of any part of the free estate, whether personal estate or real estate, would be charged on the value transferred attributable to the value of the realty. Thus a notice of an HMRC charge registered in respect of any item of free realty will secure not only the tax on the real estate but any tax unpaid on the personal estate as well.

It should be noted that in the case of strict settlements under the Settled Land Act 1925 the "owner" against whose name a D(I) charge should be registered is the life tenant (not the trustees). Likewise the proprietor in the case of registered land will be the life tenant.

IHTA84/S238 provides protection for a purchaser in good faith (who is defined in IHTA84/S272 as including a lessee, mortgagee or other person who for consideration in money or money’s worth acquires an interest in possession in the property concerned) unless, in the case of

• unregistered land in England & Wales, notice of the HMRC charge was registered at the Land Charges Department, or
• registered land in England & Wales, notice of the charge was protected by entry on the register, or
• locally registered land in Northern Ireland, the charge was entered on the appropriate register, or
• other land in Northern Ireland, the purchaser had notice of the facts giving rise to the tax charge, or
• personal property in the UK and any property situated outside the UK, the purchaser had notice of the facts giving rise to the charge.

A lessee, like any other purchaser, will take subject to the charge for tax if a notice is entered on the register of the freehold title at the time of the registration of the lease.

IHTA84/S237 (3A), inserted by FA86/SCH19PARA34, and effective from 18 March 1986 enacts that in the case of a potentially exempt transfer ( IHTM04057), property, or an interest in property, which has been disposed of to a purchaser before the transferor’s death is not subject to the HMRC charge.

Property that has been otherwise disposed of before the death, and property that at the death represents sold property shall be subject to the charge.

Similar to England & Wales a purchaser in good faith in Northern Ireland is protected by IHTA84/S238 unless:

• In the case of registered land, the HMRCs charge under IHTA84/S237 was entered on the appropriate register; or,
• In the case of unregistered land the purchaser had notice of the facts giving rise to the charge at the time the property was acquired.

Where the interests of the Exchequer may be at risk it is necessary to ensure that, in the case of registered land, a charge is entered on the register of title.

For unregistered land there is no formal system in Northern Ireland equivalent to the registration of land charges in England & Wales. Instead you must be alert to the prospect of a sale and be ready to give notice of the facts giving rise to the charge to any prospective purchaser.

This may require you to take advantage of the powers conferred by IHTA1984/S219 and IHTA84/S219A.