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It is possible for the conditions for both business relief and agricultural relief (IHTM24000) to be satisfied in regard to the same property. To prevent double relief, the legislation provides that any part of the value transferred which is reduced by agricultural relief (at whatever rate), (or would be so reduced but for IHTA84/S121 (3)), cannot be reduced by business relief, IHTA84/S114 (1).

As the reliefs do not depend on the taxpayer claiming them, the effect of IHTA84/S114 (1) is that it is not possible for the parties to choose between business and agricultural relief.

IHTA84/S114 (1) operates by preventing the same part of the value transferred being reduced by both business and agricultural relief. It gives priority to agricultural relief. However, the part of the value transferred which would otherwise be reduced by business relief retains its status as IHTA84/S105 (1) 鈥渞elevant business property鈥�, or as part of the value of 鈥渞elevant business property鈥�.

The taxpayer will sometimes claim business relief on the value of agricultural property on the excess over its agricultural value - e.g. farmland with planning permission, development value or mineral value (such as gravel and sand).

Example

Thomas, who died in November 2012, was a working farmer. He had owned and run the business, including the farmland, for many years. The net assets value of the farming business for the purposes of IHTA84/S110 is

Value of gross assets, comprising live and dead stock, and plant and machinery (拢150,000) and farmland (value wholly agricultural) (拢800,000) = 拢950,000.

Deduct business liabilities of 拢75,000. The net value of the business = 拢875,000.

So the value of the farming business as IHTA84/S105 (1) (a) 鈥渞elevant business property鈥� is 拢875,000. This is not affected by

• the fact that the land qualifies for agricultural relief
• whether or not the business liabilities are charged on any property and, if they are, whether or not the property on which they are charged is a business asset.

Because, on the facts, the rates of business and agricultural relief are the same (100%), the apportionment of the value of 拢875,000 between the two reliefs does not affect the value transferred - i.e. the value of the estate after reduction by the reliefs.

Where this is the position, you can normally follow the allocation of the reliefs by the taxpayer (provided the total is correct). However, to illustrate the way IHTA84/S114 (1) operates, the apportionment required by the subsection is set out.

Assuming the business liabilities are not charged on the land, the apportionment is:

• Value of the business = 拢875,000
• Less value reduced by agricultural relief - 拢800,000
• Value reduced by business relief = 拢75,000.

But if the business liabilities are charged on the land, the apportionment becomes

• Value of the business = 拢875,000
• Less value reduced by agricultural relief
• Farmland 拢800,000
• less liabilities charged on it - 拢75,000
• = 拢725,000
• Value reduced by business relief = 拢150,000.

On the facts, the liabilities charged on the land were incurred for the purposes of the business. But, because of IHTA84/S162 (4), in calculating the extent to which agricultural relief is due, you have to deduct all liabilities charged on the land from the value of the land. Only the net value qualifies for agricultural relief, but the whole transfer will still be covered by agricultural and business relief.