Inheritance Tax Act 1984 Schedule 2 paragraph 4

Disposal of trees etc. following exemption on death

Schedule 2 paragraph 4 deals with how the rate of inheritance tax is calculated when trees or underwood, whose value was previously left out of account on a death under the woodlands relief provisions, are subsequently disposed of after one or more reductions to the IHT rate table.

• Where woodlands relief was claimed on a death, the value of the trees or underwood is excluded from the estate at that point, deferring any charge until a later disposal.
• If the trees or underwood are subsequently disposed of, a charge to inheritance tax arises under section 126 on the disposal proceeds or market value.
• If one or more reductions to the Schedule 1 rate table have occurred between the original death and the disposal, the tax rate applied to the disposal is determined using the most recently substituted rate table.
• This ensures that the deferred woodlands charge benefits from any reductions in IHT rates that have taken effect since the original death.