It is possible for the conditions for both business relief and
agricultural relief (
IHTM24000) to be satisfied in regard to
the same property. To prevent double relief, the legislation
provides that any part of the value transferred which is reduced by
agricultural relief (at whatever rate), (or would be so reduced but
for IHTA84/S121 (3)), cannot be reduced by business relief,
IHTA84/S114 (1).
As the reliefs do not depend on the parties claiming them,
the effect of IHTA84/S114 (1) is that it is not possible for the
parties to choose between business and agricultural relief.
IHTA84/S114 (1) operates by preventing the same part of the
value transferred being reduced by both business and agricultural
relief. It gives priority to agricultural relief. However, the part
of the value transferred which would otherwise be reduced by
business relief retains its status as IHTA84/S105 (1) "relevant
business property", or as part of the value of "relevant business
property".
The taxpayer will sometimes claim business relief on the
value of agricultural property on the excess over its agricultural
value - e.g. farmland with planning permission, development value
or mineral value (such as gravel and sand).
Example
T, who died in November 2002, was a working farmer. He had
owned and run the business, including the farmland, for many years.
The net assets value of the farming business for the purposes of
IHTA84/S110 is
| live and dead stock ) | |
| plant and machinery ) | £150,000 |
| farmland (value wholly | |
| agricultural) | 800,000 |
| gross assets value | 950,000 |
| less business liabilities | 75,000 |
| net value of business | £875,000 |
So the value of the farming business as IHTA84/S105 (1) (a) "relevant business property" is £875,000. This is not affected by
Because, on the facts, the rates of business and agricultural
relief are the same (100%), the apportionment of the value of
£875,000 between the two reliefs does not affect the value
transferred - i.e. the value of the estate after reduction by the
reliefs.
Where this is the position, you can normally follow the
allocation of the reliefs by the taxpayer (provided the total is
correct). However, to illustrate the way IHTA84/S114 (1) operates,
the apportionment required by the subsection is set out.
Assuming the business liabilities are not charged on the
land, the apportionment is:
| value of business | £875,000 |
| less value reduced by agricultural relief | -800,000 |
| value reduced by business relief | 75,000 |
But if the business liabilities are charged on the land, the apportionment becomes
| value of business | £875,000 |
| less value reduced by agricultural relief | |
| 800,000 |
| -75,000 |
| 725,000 | |
| value reduced by business relief | £150,000 |
On the facts, the liabilities charged on the land were incurred for the purposes of the business. But, because of IHTA84/S162 (4), in calculating the extent to which agricultural relief is due, you have to deduct all liabilities charged on the land from the value of the land. Only the net value qualifies for agricultural relief.
