Clawback of APR on death

By Tolley in association with Julie Butler
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The following Trusts and Inheritance Tax guidance note by Tolley in association with Julie Butler provides comprehensive and up to date tax information covering:

  • Clawback of APR on death
  • APR on death following a lifetime gift
  • Conditions for retaining APR
  • Ownership by the donee
  • Qualifying replacement property
  • Effect of clawback on cumulation of lifetime transfer with later transfers
  • Replacement of agricultural property by business property
  • Trustees
  • How can clawback be avoided?

Where farmland has been transferred as a lifetime gift there can be clawback of the APR where the donor dies within seven years of the gift. When calculating the inheritance tax charge on death, all lifetime gifts within the last seven years must be brought into account.

APR on death following a lifetime gift

When an individual has made transfers within seven years of his death:

  • an additional charge will be levied at the time of his death if the transfer was a chargeable lifetime transfer (CLT).

    If the amount of the transfer was reduced by APR, the additional charge to tax is levied on the reduced amount.

  • inheritance tax will be charged for the first time if the transfer during his lifetime was a potentially exempt transfer (PET).

    The amount of the transfer is reduced by APR before the charge is levied, but only if the transfer qualified for APR at the time of the PET.

See the APR guidance note.

However, in both cases, the charge to inheritance tax will be levied on the transfers without the benefit of APR if certain conditions are not met.

IHTA 1984, s 124A(1), (2)
Conditions for retaining APR

APR will reduce the value of a transfer made within seven years of death as long as:

    More on IHT reliefs: