Capital Transfer Tax Act 1984

Charge on failure of condition of exemption—buildings etc.

3 (1) Where, under subsection (2) of section 34 of the [1975 c. 7.] Finance Act 1975, the value of any property has been left out of account and the Treasury are satisfied that at any time the undertaking given under that subsection or under paragraph 5 below in respect of that property has not been observed in a material respect, then, subject to sub-paragraph (3) below, tax shall be chargeable in accordance with paragraph 4 below with respect to the property and any property associated with it.

(2) Where, under section 34(2) of the Finance Act 1975, the value of any property has been left out of account in determining the value transferred on the death of any person and—

(a) sub-paragraph (1) above does not apply, but

(b) the property is disposed of, whether on sale or otherwise,

then, subject to sub-paragraphs (3) and (4) below, tax shall be chargeable in accordance with paragraph 4 below with respect to the property and any property associated with it; but where the value of the property has been left out of account on the death of more than one person, the tax chargeable under this sub-paragraph shall be chargeable only by reference to the last death.

(3) The Treasury may direct that the tax chargeable under this paragraph on a failure to observe an undertaking with respect to any property or on the disposal of any property shall be chargeable with respect only to that property, if it appears to them that the entity consisting of the building, land and objects concerned has not been materially affected.

(4) Tax shall not be chargeable under sub-paragraph (2) above with respect to any property—

(a) on its being sold by private treaty to a body mentioned in Schedule 3 to this Act or on its being disposed of to such a body otherwise than by sale, or

(b) if it is disposed of otherwise than by sale and the undertaking previously given with respect to it is replaced by a further undertaking under paragraph 5 below ;

and for the purposes of sub-paragraph (2) above the acceptance of any property under section 230 of this Act shall not be treated as a disposal of the property.

(5) For the purposes of this paragraph, two or more properties are associated with each other if one of them is a building falling within subsection (1)(b) of section 34 of the Finance Act 1975 and the other or others such land or objects as, in relation to that building, fall within subsection (1)(c) or (d) of that section.

4 The tax chargeable under paragraph 3 above with respect to any property shall be so much of the tax that would have been chargeable on the value transferred on the death as would have been attributable to the value of the property if—

(a) section 34 of the Finance Act 1975 had not applied to the property; and

(b) the value of the property at the time of the death had been equal to its value at the time the tax becomes chargeable and, if it becomes chargeable on a sale complying with paragraph 6 below, that value had been equal to the proceeds of sale.