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Amendment of section 89 (provisions relating to agricultural property) of Principal Act.
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135.—(1) Section 89 of the Principal Act is amended, in subsection (4)—
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(a) by substituting the following for paragraph (a):
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“(a) Where—
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(i) all or any part of the agricultural property (other than crops, trees or underwood) comprised in a gift or inheritance is disposed of or compulsorily acquired within the period of 6 years after the date of the gift or inheritance, and
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(ii) the proceeds from such disposal or compulsory acquisition are not fully expended in acquiring other agricultural property within a year of the disposal or within 6 years of the compulsory acquisition,
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then, except where the donee or successor dies before the property is disposed of or compulsorily acquired, all or, as the case may be, part of the agricultural property shall, for the purposes of subsection (2) and in accordance with paragraph (aa), be treated as property comprised in the gift or inheritance which is not agricultural property, and the taxable value of the gift or inheritance shall be determined accordingly (without regard to whether the donee or successor has ceased to be a farmer by virtue of the disposal or compulsory acquisition) and tax shall be payable accordingly.
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(aa) For the purposes of paragraph (a)—
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(i) the market value of agricultural property which is treated under paragraph (a) as not being agricultural property is determined by the following formula—
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where—
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V1 is the market value of all of the agricultural property on the valuation date without regard to paragraph (a),
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V2 is the market value of that agricultural property immediately before the disposal or compulsory acquisition of all or, as the case may be, a part thereof, and
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N is the amount of proceeds from the disposal or compulsory acquisition of all the agricultural property or, as the case may be, a part thereof, that was not expended in acquiring other agricultural property,
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and
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(ii) the proceeds from a disposal include an amount equal to the market value of the consideration (not being cash) received for the disposal.”,
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and
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(b) in paragraph (b), by substituting “disposal” for “sale”.
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(2) This section has effect in relation to disposals or compulsory acquisitions of agricultural property occurring on or after 3 February 2005.
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