IHTM26102 | Step 3 - interaction: situations where interaction applies

From HM Revenue & Customs · Inheritance Tax Manual

Interaction under IHTA84/S39A applies only to transfers on or after 18 March 1986

where the value transferred is reduced by business relief (IHTM25131) or agricultural relief (IHTM24001), and
only for the purpose of valuing specific (IHTM26011) and residuary gifts (IHTM12082) under IHTA84/S38 and IHTA84/S39.

You must not apply the rules in any other situation or for any other purpose.

Broadly the rules of IHTA84/S39A are that

you value specific gifts of relievable property at their value after relief
you reduce other specific gifts by a proportion of the relief on any other relievable property, whether the gifts are chargeable or exempt, pecuniary or of assets (such as the residence or chattels)
if the gift has to be grossed up (IHTM26003), you must gross up the reduced value under IHTA84/S39A

If the estate includes heritage property which has been given conditional exemption under IHTA84/S30, you should refer the case to Technical. You should send the case with a note showing your calculation of the tax. If final figures are not available, use estimates for illustration.