IHTM24230 | Inheritance tax implications of the AHA 1986 and Agricultural Holdings (Scotland) Act 1991: Introduction

Even though agricultural relief is generally due at 100% (subject to a restriction in the amount of 100% relief for deaths on or after 6 April 2026 IHTM25500) it is still important, where appropriate, to check for the existence of an agricultural tenancy on the property, particularly if the tenancy began before 1 September 1995 as relief may only be due at 50% in those circumstances. Follow the guidance for investigating agricultural relief at IHTM24014.

Is there a tenancy?

Even in a family or an informal situation, a protected tenancy (IHTM24220) might still arise under the 1986 Act or the 1991 Act if the necessary criteria are satisfied, even if the taxpayer contends that the parties had intended otherwise.

A tenancy does not have to be evidenced in writing but there must be acceptable evidence of an oral agreement.

There must be evidence of some intention to grant an agricultural tenancy, and exclusive occupation for rent (or other valuable consideration) would indicate such an intention.

Therefore if there has been entry into occupation for agricultural purposes (IHTM24060) coupled with payment and acceptance of rent referable to such an agreement there may be no other inference than that a tenancy from year to year was intended.

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Is there a right to vacant possession or the right to obtain it within 12 months (extended to 24 months by ESC/F17)?

Even if there is a 1986 Act or a 1991 Act tenancy subsisting at the date of death the taxpayer will sometimes claim that 100% relief should be due because the deceased had the right to serve notice on the tenant and therefore vacant possession is obtainable within 24 months (IHTM24144). Unless notice to quit had actually been given and was unchallenged as at the date of death, you should resist any such claims. ‘Right’ in the context of IHTA84/S116 (2)(a) means a legally enforceable right. The right to obtain vacant possession will not be enforceable until a notice to quit has actually been served and either accepted by the tenant or upheld by the tribunal after the serving of a counter-notice by the tenant.

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Claims for compensation by tenant on death of landlord

A claim for compensation can only be made on the termination of the tenancy, so that if the tenancy is still subsisting at the date of death or transfer no separate deduction can be made for a ‘notional’ claim as at the date of death. The open market value of the property in question will be the tenanted value taking into account the potential claim for the tenant’s improvements by negotiation between the District Valuer and the agents.