Inheritance Tax Act 1984 section 124B

Application of section 124A to replacement property

Section 124B allows agricultural property relief to be preserved when the transferee sells the original agricultural property and reinvests the full proceeds into replacement agricultural property within the allowed time period.

• Where a transferee sells all or part of the original agricultural property before the transferor's death and reinvests the entire sale proceeds in replacement agricultural property, the relief under section 124A can still apply, provided the replacement is acquired (or contracted for) within three years of the disposal — or longer if HMRC allows.
• Both the disposal of the original property and the acquisition of the replacement must be at arm's length or on arm's length terms, and the replacement property must be owned by the transferee immediately before the transferor's death (or the transferee's earlier death) and not be subject to a binding contract for sale at that point.
• The original property must have been owned by the transferee and occupied for agricultural purposes from the date of the chargeable transfer until its disposal, and the replacement property must similarly have been owned and occupied for agricultural purposes from its acquisition until the death, and must qualify as agricultural property immediately before the death.
• If the transferor dies after the transferee has disposed of the original property but before acquiring replacement property, relief can still be claimed provided the replacement is acquired within the allowed period — though this only applies where the transferor dies before the transferee.