Trusts and Inheritance Tax

Sale of land from deceased estate

Produced by Tolley
  • 27 Oct 2021 19:01

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Sale of land from deceased estate
  • Loss on sale of land
  • Sale of land relief ― principles
  • Sale of land relief ― other sales and purchases
  • Adjustments to the substituted sale price
  • Sales to beneficiaries
  • Effect on capital gains tax values
  • Sale of land relief ― claims process

Sale of land from deceased estate

Loss on sale of land

Where land is sold from a deceased estate for less than the taxable amount at date of death, relief for the loss is granted by replacing the probate value with the later sale value in the calculation of inheritance tax.

In a typical case, where the only interest in land is the deceased’s residence which his executors sell to an unconnected person for less than its probate value, the claim should be straightforward. The lower sale price is substituted for the death value and following a recalculation, a tax repayment is made to the executors. The claims process is considered below.

However, the rules for claiming sale of land relief can be complex and can produce disadvantageous results where there are other sales and purchases or where the property sold has changed in some way.

Sale of land relief ― principles

Broadly, the provisions are that the ‘sale value’ will be substituted for the ‘value on the death’ and the inheritance tax position re-calculated, if the following conditions are met:

  1. a claim is made by the ‘appropriate person’ who

  2. has sold ‘an interest in land’ included in a deceased’s estate

  3. within four years of death (which may be extended in the case of compulsory purchases)

  4. for a consideration lower than its death value

IHTA 1984, s 191

HMRC has confirmed that it will not accept a claim to substitute a higher sale price for the date of death value, even though the legislation implies that the sale price needs only to be different, rather than lower. Usually, the purpose of making such a claim would be to establish a higher base cost for capital gains tax purposes. See the Effect on capital gains tax values section below.

The ‘appropriate person’ is ‘the person liable for inheritance tax attributable to the value of [the interest in land]’ and so includes the personal representatives as well as the trustees if the land

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