How to fill in form IHT38 — claiming loss relief on land sold after death

The people liable for the Inheritance Tax on the land or buildings — typically the executors, administrators, trustees or donees who are paying it.

If more than one group could be liable, the appropriate persons are whichever group is actually paying the tax.

As with IHT35: you cannot claim relief if no Inheritance Tax was due on delivery of the IHT account.

Without tax paid, there is no appropriate person to make the claim.

Qualifying sales can be made within the 3-year period beginning on the date of death.

Sales made within 4 years of death, at a loss, are treated as if they fell within that 3-year period too — so a loss-making sale in year 4 still qualifies, even though a profitable one wouldn't.

The claim itself must be made within 4 years after the end of the 3-year sale-window period — which means, at the outer edge, up to 7 years from the date of death.

This is longer than the shares relief's 12-month sale window plus 4-year claim deadline — don't assume the two forms run on the same clock.

HMRC will not accept IHT38 signed by an agent.

Every appropriate person signs personally, in their own capacity.

You cannot claim relief if the sale price differs from the value at death by less than £1,000, or 5% of the value at death — whichever of the two is LOWER.

This is assessed property by property, not across the whole estate.

A property valued at £40,000 at death: 5% of that is £2,000, which is higher than the flat £1,000 threshold — so the LOWER figure, £1,000, is what applies.

A sale price within £1,000 of £40,000 doesn't qualify for relief, however marginal the loss.

The 5% limb only becomes the binding (lower) figure when 5% of the death value is under £1,000 — that is, for property valued below £20,000. For anything above that, £1,000 stays the operative floor.

The threshold stops trivial value movements — the kind that happen in almost any sale simply from market noise, agent negotiation, or the passage of time — generating administrative claims that cost more to process than the tax they'd recover.

Give details of ALL land and buildings sold within the 4 years after death — whether sold for more or less than the value at death.

Each row: address or description of the property and its tenure, value at the date of death, date of sale, gross sale proceeds, and the name of each purchaser.

In England and Wales, the date of sale is normally the date contracts are exchanged.

In Scotland, it's when the terms of the offer and qualified acceptance have been agreed in writing.

As with shares relief, the relief is based on the gross sale price, restricted only by the net price of any purchases (Section 5).

Don't deduct commission, stamp duty or legal fees from the sale figure — the gross sale price is usually the agreed price in the sale contract.

Special rules apply to a lease, or an interest in a lease, with less than 50 years unexpired at the date of death.

Show the unexpired term at the date of death alongside the property description.

HMRC's own note on the form asks for a full Completion Statement for every property in the claim, to help process it quickly.

Get this from the conveyancing solicitor who handled each sale — it's the standard document confirming the final completion figures.

You may not be able to claim relief on a sale to a beneficiary of the estate, or to a relative of a beneficiary.

Any profit made on such a sale or exchange may also reduce the relief available on a genuinely qualifying, arm's-length sale.

The concern is straightforward: a sale to a connected party isn't necessarily at the property's true open-market value, so it's a weak basis for substituting a lower figure into the estate's IHT calculation.

An arm's-length sale to an unconnected buyer is the strongest kind of evidence for a genuine loss.

Box 2, in the 'About the land and buildings' section, asks directly whether the purchaser or any relative of the purchaser had a beneficial interest in any of the sold properties between death and sale.

Answer honestly and explain — a 'yes' doesn't automatically fail the whole claim, but it needs HMRC's scrutiny of that specific sale.

Were any sale prices lower than the best price you could reasonably have obtained at the date of sale?

If yes, explain why a lower price was accepted, and state the best price you believe was reasonably achievable.

Do you intend to make further sales of land in the 4 years following death?

This affects whether the relief you're claiming now should be provisional (see Section 6).

Did you purchase any interest in land or buildings, as the appropriate person, between the death and 4 months after the last of the sales in this claim?

Important: you cannot claim relief at all if fewer than 4 months have passed since your last sale and you intend to buy land, in the same capacity, within those 4 months — wait out the window, or accept that the claim isn't ready yet.

Was anything different about the property at the date of sale compared to the date of death — a lease granted, a right of way granted, structural damage?

Any material change between the two dates can affect whether the sale price is comparable to the death-date value.

Has any statutory compensation become payable to anyone since the death, for any interest in the land or buildings in this claim — for example, compulsory purchase compensation?

Have the vendors, or their relatives, acquired a right to repurchase the property that was sold?

Has anything been received since death under an insurance claim relating to the land or buildings in this claim — for instance, a payout for damage that affected the sale price?

Any refund is paid by Faster Payments to a bank account, identified by the Inheritance Tax reference number — give the account name, sort code and account number.

Tick this if you will not sell or exchange further interests in land in the 4 years after death, and/or will not purchase any interest in land in the 4 months after your last sale in this claim.

If further sales, exchanges or purchases are intended, the relief HMRC grants is provisional — you must report any further sales, exchanges or purchases to HMRC, and clearance won't be issued until the position is final.

Name, capacity (executor, transferee, trustee), signature and date, for up to four signatories.

As with every page of this form: it cannot be accepted if signed by an agent.

HMRC's own advice: don't make a claim until all the properties you intend to sell have actually been sold.

A claim for relief cannot be withdrawn once made, even if it turns out to be disadvantageous — for example, if a property you expected to sell at a loss is later sold at a small profit instead, changing the whole-claim arithmetic against you.

If a property was jointly owned at death, any discount applied to reflect that joint ownership does NOT apply to your share of the sale proceeds.

This mismatch — a discounted death-date value compared against a full-share sale price — can itself make a claim disadvantageous. Model it before you claim, not after.

As with shares relief: if a claim is made after the interest in land has already been distributed from the estate, relief may not be available.

Because a claim can't be withdrawn once made, get every qualifying sale's Completion Statement together and check the whole-portfolio arithmetic (Section 3) before submitting — not after.