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HMRC internal manual

Inheritance Tax Manual

Related property: how the rules work

Under IHTA84/S161,

  • you bring together the property (IHTM04030) in the deceased or transferor’s estate (IHTM04029) and the related property (IHTM09733) to make one combined unit which you should value in the normal way, then
  • you calculate the ‘appropriate proportion’ (IHTM09735) of the value of that combined unit to give you the value of the property in the deceased/transferor’s estate.
T owns 40 out of the 100 issued shares in X Ltd. T’s spouse owns 30 of the remaining shares. These shares are related property. Valued on its own T’s holding is worth £8,000. The value of the combined holding of 70 shares for IHT purposes is £28,000. Under the related property rules, the value of T’s holding for IHT purposes is not £8,000, but four sevenths (the appropriate proportion) of £28,000, that is £16,000.