Inheritance Tax Act 1984 section 162B

Liabilities attributable to financing certain relievable property

Section 162B requires that where a person has borrowed money to acquire, maintain or enhance property qualifying for business property relief, agricultural property relief or woodlands relief, the debt must first be set against the relievable property value before any relief is applied, thereby reducing the amount of relief available.

• Where a liability has been incurred to finance the acquisition, maintenance or enhancement of property qualifying for business property relief, agricultural property relief or woodlands relief, the liability must be deducted from the value of that relievable property before the relevant relief is calculated, so that relief applies only to the net value.
• Once a liability has been used to reduce the value of relievable property for a particular transfer, it cannot be used again to reduce the value of a subsequent transfer by the same transferor, preventing the same debt being double-counted.
• An exception to the rule against double-counting applies for ten-year anniversary charges on relevant property trusts: a liability previously taken into account for such a charge can still be taken into account for a later ten-year anniversary charge.
• The provisions extend beyond lifetime transfers and death transfers to cover charges arising on relevant property trusts, including ten-year anniversary charges and proportionate (exit) charges, with references to the transferor including the trustees of the settlement.

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