IHTM24114 - Replacement property: Interaction with business relief
You may need to consider the interaction of business and
agricultural relief where the property that has been replaced would
have qualified in part for business relief in addition to
agricultural relief. (
IHTM25121). The operation of this is
best illustrated by example
Example
A owns and farms Fairfield for £20m for development and
disposes of his other farming assets. The agricultural value of
Fairfield was only £3m.
In March 2002, A buys The Gallops for £9m (which is
wholly attributable to agricultural value) to resume his farming
business.
In April2003, A dies. The Gallops then has a value of
£10m, wholly agricultural.
The two year occupation (
IHTM24071) condition in IHTA84/S118 (1)
is satisfied and the ownership conditions for business relief (
IHTM25301) are also satisfied. On
A’s death, the agricultural relief is restricted by IHTA/S118
(3). The apportionment in
IHTM24113 gives the following AR
calculation
| 3,000,000 | ||
|
9,000,000 | X 10,000,000
Fairfield and has done so for a number of years. In October 2001, A sells | =£3,333,333 |
So the agricultural relief on The Gallops is limited to £3,333,333. However, A had carried on a genuine farming business at Fairfield. If instead of selling Fairfield, he had died in October 2001, the non-agricultural value (£17m) of Fairfield would have qualified for business relief. So, the excess of £6,666,667 wholly qualifies for business relief because
- the ownership conditions in IHTA84/S107 (1) are satisfied, and
- there is no restriction of business relief under IHTA84/S107(2) because the relief is less than it would have been if the replacement had not been made.
Note that the figures in this example do not take into account any business relief on the other assets of the farming business.
