Introduction Details of the Section
3.Subsection (2) amends subsection (3) of section 115 of the Inheritance Tax Act 1984 (IHTA) to ensure relief continues to be limited to the agricultural value of agricultural property. Existing provisions limit relief by establishing agricultural value with reference to an assumed “perpetual covenant” that would prevent property being used for anything other than agricultural purposes under the terms of the Act. The amendment provides that an equivalent restriction must apply when establishing the agricultural value of the property (and therefore relief) outside the UK, Channel Islands and the Isle of Man. This is to ensure that relief is given on the same terms for property in other EEA states where the reference to a “perpetual covenant” may not have meaning.
4.Subsection (3) amends subsection (5) of section 115 of IHTA. The existing subsection allows relief in respect of agricultural property located in the UK, Channel Islands and the Isle of Man. Subsection (3) extends this so that relief is also applied to agricultural property located in states other than the UK, provided that the state in question is an EEA state (as defined by the Interpretation Act 1978) when a transfer of value under the terms of IHTA occurs. This change has a consequential effect on section 165 of the Taxation of Chargeable Gains Act 1992 (TCGA) as applied by virtue of paragraphs 1 and 3 of Schedule 7 to TCGA. The change to IHTA means that property which qualifies for APR under this section will also qualify for business asset ‘hold over’ relief where it is farmed by a person other than the owner (property farmed by the owner already qualifies for hold-over relief regardless of where it is situated).
5.Subsection (4) inserts a new subsection (7A) into section 116 of IHTA. This ensures that, where agricultural relief for property is dependent on provisions that are specific to (or have meaning only in respect of) the law of the UK, the relevant UK legislation is to be taken to refer to equivalent provisions in other EEA states. The amendment enables existing references to rights and obligations that are specific to the law of the UK to operate in the context of the law of a foreign jurisdiction.
6.Subsection (5) amends subsection (1) of section 125 of IHTA, removing the words “in the United Kingdom”. The amendment removes the existing geographical restriction on the location of property qualifying for woodlands relief in accordance with section 125.
7.Subsection (6) introduces a new subsection (1A) into section 125 IHTA. This applies woodlands relief to land located in the UK or other EEA state at the time of the death of the person whose estate is chargeable to IHT.
8.Subsection (7) provides that the extension of relief against inheritance tax for qualifying agricultural and woodland property will take effect for transfers of value where tax would have been payable on or after 22 April 2009 and for similar events before that date where IHT on such property was due or paid on or after 23 April 2003.
9.Subsection (8) provides that IHT paid on or after 23 April 2003, together with any interest that was charged on such IHT, on property newly qualifying as agricultural and woodland property under this section, is repayable provided a claim for repayment is made. Such repayments (including interest) will attract interest under an existing IHTA provision. The deadline for making a claim to repayment will be six years after the date on which a qualifying payment was made (this is the normal time limit for claiming repayments of overpaid IHT) or, if later, 21 April 2010.
10.Subsection (9) provides that, in the case of property becoming entitled to relief as a result of this section, an election to obtain woodlands relief can be made within two years of the date of death giving rise to the IHT charge or, if later, 21 April 2010. Claims for repayment of IHT will be possible where IHT paid falls within the previous subsection.