IHTM24112 - Replacement property: Limitation of the relief

IHTA84/S118 (3) restricts the relief available under subsections (1) and (2). Subsection (3) provides that the relief should not exceed what it would have been had the replacement(s) not been made. Its purpose is to prevent a person who has qualified for relief from increasing the amount of relief available by purchasing a much more expensive property shortly before death or making a transfer. It is an anti-avoidance provision.

IHTA84/S118 (4) provides that changes resulting from the formation, alteration or disposition of a partnership are to be disregarded for the purposes of IHTA/S118 (3).

Your approach to IHTA84/S118 (3) should be practical. If there is any indication that the deceased’s/transferor’s resources were being rearranged into considerably more extensive agricultural property to obtain increased relief on the death/transfer, you should seek advice from Technical. Otherwise, you should adopt a reasonable approach aimed at quantifying and agreeing the restricted relief in a practical way. The approach you should adopt is illustrated by example at IHTM24113.