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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Legatees: acquisitions: example

On 31 December 1992 personal representatives acquire the deceased’s shareholding of 600 shares in a company. This represents a 60 per cent holding in that company and is valued at £60,000 or £100 per share. On the date of death a holding of 200 shares or 20 per cent of the company would have been valued at £2,000 or £10 per share.

When residue is ascertained each of the three legatees receives 200 shares from the personal representatives. They are each treated as having an acquisition cost of one-third of £60,000 (the personal representatives acquisition value). Their acquisition cost is thus £20,000 not the value of £2,000 that would have been placed on a 20 per cent shareholding.

In addition the personal representatives acquire the sole ownership of a parcel of land. This is valued at £100,000 at the date of death. On this date a 50 per cent interest in the land would have been valued at £45,000.

When residue is ascertained two legatees become equal joint owners of the land. They are each treated as having an acquisition cost of one-half x £100,000 (the personal representatives acquisition cost). Their acquisition cost is thus £50,000 for their 50 per cent interest not the value of £45,000 that would otherwise have been placed on such a holding at the date of death.