Inheritance Tax Act 1984

131 The relief. U.K.

(1) Subject to section 132 below, this section applies where [F1 because of the transferor’s death within seven years of the transfer, tax becomes chargeable in respect of the value transferred by a potentially exempt transfer or (by virtue of section 7(4) above) additional tax becomes chargeable in respect of the value transferred by any other chargeable transfer and (in either case)] all or part of the value transferred is attributable to the value of property (“the transferred property”) which—

(a) is, at the date of the death, the property of the person (“the transferee”) whose property it became on the transfer or of his spouse [F2 or civil partner] , or

(b) has, before that date, been sold by the transferee or his spouse [F2 or civil partner] by a qualifying sale;

and in the following provisions of this section “the relevant date” means, in a case within paragraph (a) above, the date of the death, and in a case within paragraph (b), the date of the qualifying sale.

(2) If—

(a) the market value of the transferred property at the time of the chargeable transfer exceeds its market value on the relevant date, and

(b) a claim is made by a person liable to pay the whole or part of [F3 the tax or, as the case may be, additional tax],

[F3 the tax or, as the case may be, additional tax] shall be calculated as if the value transferred were reduced by the amount of the excess.

[F4 (2ZA) A claim under subsection (2)(b) must be made not more than 4 years after the transferor's death.]

[F5 (2A) Where so much of the value transferred as is attributable to the value, or agricultural value, of the transferred property is reduced by any percentage (in this subsection referred to as “the appropriate percentage”), in accordance with Chapter I or Chapter II of this Part of this Act, references in subsection (2) above to the market value of the transferred property at any time shall have effect—

(a) in a case within Chapter I, as references to that market value reduced by the appropriate percentage; and

(b) in a case within Chapter II, as references to that market value less the appropriate percentage of the agricultural value of the transferred property at that time.]

(3) A sale is a qualifying sale for the purposes of this section if—

(a) it is at arm’s length for a price freely negotiated at the time of the sale, and

(b) no person concerned as vendor (or as having an interest in the proceeds of the sale) is the same as or connected with any person concerned as purchaser (or as having an interest in the purchase), and

(c) no provision is made, in or in connection with the agreement for the sale, that the vendor (or any person having an interest in the proceeds of sale) is to have any right to acquire some or all of the property sold or some interest in or created out of it.

Textual Amendments

F1 Finance Act 1986 Sch. 19, para. 23(1),with effect from 18March 1986.Originally

“(by virtue of section 7(2) above) additional tax becomes chargeable in respect of the value transferred by a chargeable transfer because of the transferor's death within three years of the transfer and”.

F2 Words in s. 131(1) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 25

F3 Finance Act 1986 Sch. 19, para. 23(2),with effect from 18March 1986.Originally

“the additional tax”.

F4 S. 131(2ZA) inserted (1.4.2011) by Finance Act 2009 (c. 10), s. 99, Sch. 51 para. 6; S.I. 2010/867, art. 2(2)

F5 Finance Act 1986 Sch. 19, para. 23(3),with effect from 18March 1986.