I8.338 Land and buildings used by a partnership

IHT, trusts and estates

I8.338 Land and buildings used by a partnership

I8.338 Land and buildings used by a partnership

A partner can hold land and buildings used by a partnership in three ways. He can:


    (a)     let the land to the partnership; or


    (b)     permit the other partners to share occupation of the land with him; or


    (c)     hold the land on trust for the partnership so that it forms part of the partnership capital

For the separate property of partners see also I6.221, I6.223.

The grant of a lease in respect of agricultural property to a farming partnership gave rise to difficulties until the passing of FA 1981, because even if a full rent was charged, granting a lease automatically reduced the value of the grantor's estate due to the loss of vacant possession. FA 1981, s 97 (now IHTA 1984, s 16) made it easier by enacting that the grant of a lease for full consideration is not a transfer of value, although it later emerged that HMRC regarded full consideration as the level of 'tender' rents offered for new tenancies of agricultural land rather than the often much lower rents fixed by statutory arbitration for existing tenancies1.

The current scheme of agricultural relief was also introduced by FA 1981 and the rate of relief was the lower rate of 30% for agricultural land on the basis that the transferor did not have vacant possession2. For transfers and other events after 9 March 1992 the rate of agricultural relief is 50% for land subject to a tenancy which commenced before 1 September

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