Inheritance tax bill on a 1/8 land share

by **jswd32** on Tue Jul 19, 2011 7:05 pm

Due to poor health of my father I am set to inherit part of an 1/8 share in land, and would like to know where I stand with regard to inheritance tax. I am a Financial Adviser and understand the principles of Inheritance tax but am unsure of my potential liability.
My fathers share is 1/8 of 440 hectares of land which has outline planning permission for property development by a consortium of developers. As the land is all essentially agricultural land I guess their is a hope value on the land, but to put into perspective the consortium has been trying to raise funds to buy the land over he past 10 years. However due to poor market conditions nothing has been sold just option agreements.
For the IHT side my father is divorced so no double up on the 325k annual exemption. There may be a potential that the land value at present is purely agricultural and in effect may come under the 325k for my Father's share.

The main question is if the current valuation is in excess of 325k and a tax liability arises, can I be taxed on an asset that can not be sold to pay the IHT bill? As far as i'm aware HMRC can force the sale of the asset after 6 months if the tax bill is can not be paid.

In this instance what would be the likely outcome?

Regards

Jonathon

by **Lee Young** on Wed Jul 20, 2011 1:35 pm

When your father dies his sahre of this investment willneed to be valued. That value will take into account hope value etc, and what ever it is will be added to the balance of his estate and the excess, over the £325,000, will be taxed at 40%.

Do the option rights you mention die withhim or are they exercisable by the prs?

Sounds like he has an interest in the options, not an interest in land?

by **jswd32** on Thu Jul 21, 2011 12:47 am

My father receives a cash payment for a 3yr option and would currently take any proceeds of a land sale.
My main concern is, what happens if there is a IHT bill that can't be paid and no way of selling the asset to pay the bill?
Do they wait until land is sold to reclaim tax whenever that may be? If they do wait is an interest charged for the time elapsed?

Regards

Jonathon

by **Lee Young** on Thu Jul 21, 2011 10:50 am

Certainly if the tax is not paid on time interest is payable on top. HMRC may treat it as an interest in land and therefore allow the instalment option to apply, but again there would still be interest payable on the outstanding tax in between the annual instalments.

by **honda76** on Wed Aug 03, 2011 12:35 pm

hello my mother has been named in a will for a farm in ireland along with her 3 brothers and sister which was left for them from their unkle the estate is valued at well over the the 325,000 threshold if it is split 5 ways will they have to pay inheritance tax thank you