Inheritance Tax Act 1984 section 131

The relief

Section 131 provides fall in value relief, which allows the inheritance tax charge on a lifetime transfer to be reduced where the transferred property has declined in value between the date of the gift and the date of the transferor's death (or an earlier qualifying sale).

• Where a transferor dies within seven years of making a lifetime transfer, and the transferred property has fallen in value by the date of death or earlier qualifying sale, relief may be claimed to reduce the tax or additional tax payable
• The relief works by reducing the value transferred by the amount of the fall in value, so that tax is effectively calculated on the lower value at death or sale rather than the original transfer value
• The relief must be claimed by a person liable to pay the tax within four years of the transferor's death, and the property must still be owned by the transferee (or their spouse or civil partner) at the date of death, or must have been disposed of in an arm's length qualifying sale
• Where business property relief or agricultural property relief was applied to the original transfer, the market values used in the fall in value calculation are adjusted to reflect those percentage reductions