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HMRC internal manual

Inheritance Tax Manual

Lifetime transfers: specific lifetime reliefs: fall in value relief: introduction

The value of a transferred asset may fall in value between the date it is given away by the transferor and the date the transferor dies. If tax is payable on the gift in its own right on the death of the transferor there are some circumstances where the tax charge might be reduced. This is known as fall in value relief, provided by IHTA84/S131 to S140. It can apply where tax, or additional tax,

  • is payable because of the transferor’s death within seven years of a lifetime transfer,
  • the value of the transferred asset has fallen between the date of the transfer and the date of death (or, in certain circumstances, the date of an earlier sale of the asset).

The relief may therefore apply to either

  • the tax payable on the death on a failed potentially exempt transfer (IHTM14511), or
  • additional charges arising on death after an immediately chargeable transfer. (IHTM14571)


Joel transfers a house to his son Philip on 1 November 2009. At that date it was valued at £400,000. Joel dies on 1 March 2012. The house at that date is valued at £375,000.

  • Without the relief Inheritance Tax (IHT) of £30,000 (£400,000 - £325,000 (the IHT nil-rate band at the date of death) = £75,000 × 40%) would be payable on the transfer. If Philip makes a claim for fall in value relief the date of death value of £375,000 will be used to calculate the tax instead. The IHT payable by Philip is reduced to £20,000.