The deed of arrangement will enable assets to be redirected to new beneficiaries as if they had passed under the Will, providing certain conditions are met. The claim can be made using HMRC form IOV2 and, if applicable, it will replace the terms of the Will for the property that is varied and will be effective for CGT and/or IHT purposes. In an agricultural context, it will mean that, where property was eligible for APR or BPR in the hands of the deceased, it can pass to new beneficiaries free of IHT whereas, under the terms of the Will, it might have gone to an intermediate generation and, as such, might have come within the scope of the new restricted reliefs in future. The conditions for the relief are set out in IOV2, but in essence and inter alia:

• The variation must be made within two years after the death
• The variation must be signed by all the people who would lose out because of it
• The variation must clearly identify the part(s) of the estate that are being varied, and say who is to benefit from the variation
• For a variation to take effect for IHT and/or CGT purposes, it must contain a statement that those signing the variation intend it to take effect for tax purposes. The statement may apply to either IHT or CGT alone or for both taxes.
• The destination of the same assets or entitlement passing under a Will or by intestacy may not be varied more than once
• Where a variation is made and assets from outside the estate are used to compensate the original beneficiary for their loss, the variation will not be treated as if the deceased had made it

Clearly this will be of great relevance where a farming client has died within the last two years and, in some cases, it could greatly simplify current tax planning.

• See the full details here