IHT on connected land purchase.

[Petewake]

My widowed mother, aged 91, owns a house ( value well over IHT threshold ) which has an area of the back garden suitable for construction of one house ( Subject to planning permission ). If I was to purchase this land, a fair market value ( without planning permission ) would be around three thousand pounds. If I subsequently applied for and obtained planning permission, the plot value would increase to about 75k. What effect, if any, could such a transaction have on the value of her estate for IHT purposes? Many thanks in anticipation for any comments received.

[Ian McTernan CTA]

You should ensure you get a valuer's report for the land stating the fair market value of the land as the Revenue may query this at a later stage.

The land should be bought before any planning permission is applied for- it is entirely possible that planning permission will be denied.

Provided no action about planning permission has yet to be taken then the increase in the value of the estate is the amount paid for the land-£3K.

If planning has not been undertaken regarding the reminder of the estate, then you should do so without delay, otherwise there may be a large IHT liability on death. I know Nigel Lord (see other postings) specialises in this area and should be able to help.

Ian McTernan CTA
McTernan Associates Ltd
Chartered Tax Advisers
ian@imcternan.com