Trusts and Inheritance Tax

Clawback of APR on death

Produced by Tolley
  • 19 Oct 2021 23:07

The following Trusts and Inheritance Tax guidance note Produced by Tolley 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?

Clawback of APR on death

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:

  1. 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.

  2. 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 Agricultural property relief (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.

Conditions for retaining APR

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

  1. the donee owns the property transferred at the date the donor’s death, and has done so since he acquired it from the donor

  2. the property is not, at the time of the death, subject to a binding contract for sale, and

  3. the property is agricultural property at the date of the donor’s death and has been occupied by the donee (or another person) for the purposes of agriculture since the donee acquired it (or, wher

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