Inheritance Tax Act 1984 section 137

Interests in land

Section 137 ensures that when calculating relief on the sale or revaluation of an interest in land after a chargeable transfer, any changes to the land or the interest between the transfer date and the relevant date (death or sale) are properly accounted for, so that like is compared with like.

• Where changes to the land or the interest (such as a lease being granted, a building being demolished or erected, or minerals being extracted) have reduced the value of the interest, the market value at the relevant date is increased to compensate for the change, ensuring the relief is not distorted.
• The adjustment is calculated as the difference between the market value of the interest at the time of the original transfer and what that value would have been if the changed circumstances had already existed at the time of the transfer.
• Where compensation has been paid under statute to the transferee (or their spouse or civil partner) for a restriction on the land's use or development or any other reduction in value, the change itself is ignored but the compensation amount is added to the market value at the relevant date.
• Where changes between the transfer date and the relevant date have increased the value of the interest, the market value at the relevant date is reduced to what it would have been if the change had not occurred, preventing an artificial uplift.