IHT claim for fall in value relief for land and buildings

Where, within four years of the date of the deceased’s death, a property in their estate is sold at open market value for less than probate value, you can make a claim to recalculate the inheritance tax using the sale value instead.

Conditions

A number of conditions must be satisfied:

• a claim must be made within seven years of the date of death
• all sales within the first three years following of death must be taken into account, whether they were for more or less than probate value; sales made in the fourth year for more than the date of death value can be ignored.
• a claim must be made by the “appropriate person”. This is the person liable to pay the Inheritance Tax on the land or buildings. Usually this will be the executor of the estate, but might be the trustees of a trust created by a will or in some cases the beneficiary. Note. The relief is not available where the property has already been transferred to a beneficiary and later sold.

Other situations

Although HMRC may try to object, there’s nothing specific in the legislation to disallow a claim to be made, even where the property was sold for more than the probate value. This would reduce the combined Inheritance Tax and capital gains tax bill on the property where the rate of the former is lower than the latter. One situation in which this applies is where the property in question is subject to 50% business property relief. The effective rate of IHT is this instance is 20% while CGT might be payable at up to 28%.

Use our IHT Claim for Fall in Value Relief for Land and Buildings to save time and ensure you include all the information HMRC needs to process your claim.  Alternatively, you can use HMRC’s Form IHT38 (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/373493/IHT38.pdf).