Inheritance Tax Act 1984 section 196

Sales to beneficiaries etc. and exchanges

Section 196 deals with adjustments to sale prices used in a land relief claim where the claimant has also made a non-qualifying sale to a beneficiary or exchanged an interest in land within three years of the death, and that sale or exchange produced a price or value exceeding the death value.

• Where a claimant sells land to a beneficiary (a non-qualifying sale) or exchanges any interest in land within three years of death, and the sale price or exchange value exceeds its value on death, an adjustment is required to the qualifying sale prices in the relief claim.
• If the claim covers only one qualifying interest, its sale price is increased by the full amount of the excess from the non-qualifying sale or exchange over the death value.
• If the claim covers more than one qualifying interest, the excess is apportioned between those interests using a fraction based on each interest's respective loss relative to the total losses across all qualifying interests.
• The apportionment fraction uses absolute differences between death values and adjusted sale prices, disregarding whether any individual interest shows a gain or a loss.