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" Purchaser bearing inheritance tax liability
     16A. Where—


(a) there is a land transaction that is—


(i) a transfer of value within section 3 of the Inheritance Tax Act 1984[2] (transfers of value), or

(ii) a disposition, effected by will or under the law of intestacy, of a chargeable interest comprised in the estate of a person immediately before his death,



and

(b) the purchaser is or becomes liable to pay, agrees to pay or does in fact pay any inheritance tax due in respect of the transfer or disposition,



his liability, agreement or payment does not count as chargeable consideration for the transaction.

Purchaser bearing capital gains tax liability
     16B. —(1) Where—



(a) there is a land transaction under which the chargeable interest in question—


(i) is acquired otherwise than by a bargain made at arm's length, or

(ii) is treated by section 18 of the Taxation of Chargeable Gains Act 1992[3] (connected persons) as so acquired,



and

(b) the purchaser is or becomes liable to pay, or does in fact pay, any capital gains tax due in respect of the corresponding disposal of the chargeable interest,



his liability or payment does not count as chargeable consideration for the transaction.

    (2) Sub-paragraph (1) does not apply if there is chargeable consideration for the transaction (disregarding the liability or payment referred to in sub-paragraph (1)(b)).

Costs of enfranchisement
     16C. Costs borne by the purchaser under section 9(4) of the Leasehold Reform Act 1967[4] or section 33 of the Leasehold Reform, Housing and Urban Development Act 1993[5] (costs of enfranchisement) do not count as chargeable consideration.".

     4. —(1) In Schedule 17A (further provisions relating to leases) in paragraph 10(1) (tenants' obligations etc that do not count as chargeable consideration) after paragraph (e) insert—

" (f) any liability of the tenant for costs under section 14(2) of the Leasehold Reform Act 1967 or section 60 of the Leasehold Reform, Housing and Urban Development Act 1993 (costs to be borne by person exercising statutory right to be granted lease);

(g) any other obligation of the tenant to bear the landlord's reasonable costs or expenses of or incidental to the grant of a lease;

(h) any obligation under the lease to transfer to the landlord, on the termination of the lease, payment entitlements granted to the tenant under the single payment scheme (that is, the scheme of income support for farmers in pursuance of Title III of Council Regulation (EC) No 1782/2003[6]) in respect of land subject to the lease.".

Tom Watson

Dave Watts
Two of the Lords Commissioners of Her Majesty's Treasury

22th March 2006

[2] 1984 c. 51. By virtue of section 100(1) and (2) of the Finance Act 1986 (c. 41), on and after 25th July 1986 the Capital Transfer Act 1984 may be cited as the Inheritance Tax Act 1984, and any reference in that Act to capital transfer tax is to have effect as a reference to inheritance tax, except where the reference relates to a liability to tax arising before 25th July 1986.back

[3] 1992 c. 12.back

[4] 1967 c. 88.back

[5] 1993 c. 28.back

[6] O.J. No. L 270, 21.10.2003, p.1, as last amended by Council Regulation (EC) No. 864/2004 (O.J. No. L 161, 30.4.2004, p.48 as corrected by a corrigendum at O.J. No. L 206, 9.6.2004, p.20).back

 © Crown copyright 2006