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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Lifetime transfers: specific lifetime reliefs: fall in value relief: what is market value?

‘Market value’ (IHTM09703) is defined as usual for Inheritance Tax (IHT) purposes by IHTA/S160. But you should note that the values you compare are the values, as at the dates of transfer and death or sale, of the transferred asset itself.

In many cases the value of the transfer for IHT purposes will be the same as the value of the transferred asset. But it can be different when a person transfers only part of an asset (such as a half-share of a house or part of a holding of shares) and the value of the transfer is calculated using the loss to the estate basis (IHTM04054). In these cases the loss to the estate is often greater than the value of the asset transferred. The example below shows how you apply fall in value relief in this situation


Ajani owns 6,000 shares in a private company with an issued share capital of 10,000 shares. She gives away 2,000 shares reducing her holding to 4,000 shares.

Assuming no reliefs or exemptions are due, the loss to the estate is

6,000 shares at £5 30,000
4,000 shares at £3 12,000
Value transferred £18,000

The market value of the 2,000 shares transferred, valued in isolation, is £5,000 (£2.50 each) at the date of transfer but only £3,000 (£1.50 each) when Ajani died two years later. The reduction in the market value of the transferred shares is £2,000 (£5,000 less £3,000).

For the purposes of fall in value relief, the value transferred is reduced by £2,000 from £18,000 to £16,000.

In valuing the transferred asset, take no account of

  • any other assets owned by the transferor or transferee or
  • any ‘related property’ (IHTM09731).

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Agricultural and Business Relief

The values of the transferred asset at both dates are the values after reduction by any agricultural or business relief due.


Andrew makes a chargeable transfer of land worth £300,000. The land was used by a partnership of which he was a member. After 50 percent business relief the value transferred is £150,000. When Andrew dies two years later the land is worth only £200,000.

For the purpose of fall in value relief, the values of the transferred land are £150,000 at the date of transfer and £100,000 at the date of death. The value transferred is accordingly reduced by £50,000 to £100,000 in calculating the tax payable by the transferee.

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Foreign Currency

You can accept a loss on a gift of foreign currency caused by a fall in the exchange rates providing there is evidence that the transferee still held the foreign currency at the transferor’s death.

For other foreign assets the market value at any time is based on the exchange rate at the date of valuation. This can mean that, even if the value of the asset in the local currency has fallen between the date of transfer and the date of sale, if changes in the exchange rate mean that the asset is worth more in Sterling, fall in value relief will not apply.


Tony transfers an apartment in New York to his son Giovanni in September 2008. It is valued at US$700,000. Using the exchange rate at that time it is valued at £390,000 in Sterling. Giovanni sells the apartment on the open market for US$625,000 in September 2010. Using the exchange rate at the date of sale the apartment sold for £400,000 in Sterling. When Tony died in March 2011 Giovanni could not claim fall in value relief as the apartment was valued at a higher figure in Sterling terms at the date of sale, even though it was sold for a lower value in the local currency.