Lifetime transfers: specific lifetime reliefs: fall in value relief: not all of the transferred assets are sold
Where some of the property transferred has been sold and some remains unsold then the relief is calculated in a similar way to where there is more than one sale (IHTM14630). The relief is calculated separately for each asset sold for a loss and for each asset which has a lower market value at the date of death than at the date of the lifetime transfer.
Curtis transfers a portfolio of shares valued at £100,000 to Dima on 5 April 2008. The portfolio consists of:
- 1,000 shares in company XYZ worth £30,000
- 3,500 shares in company ABC worth £50,000, and
- 1,750 shares in company DEF worth £20,000.
Dima then sells 600 shares in XYZ on 5 January 2009 for £15,000
- 2,100 shares in ABC on 10 February 2009 for £25,000
- 1,750 shares in DEF on 12 March 2009 for £22,500.
All the sales are arm’s length transactions at open market values.
Curtis dies on 4 March 2010 so that the transfer becomes a chargeable transfer and Dima makes a claim for fall in value relief.
At the date of Curtis’s death 400 shares in XYZ have a market value of £12,250, and 1,400 shares in ABC have a market value of £18,000.
Calculating the relief due
|600 shares in XYZ at the transfer date had a market value of||£18,000|
|600 shares in XYZ sold on 5 January 2009 for||£15,000|
|Reduction in value||£3,000|
|400 shares in XYZ at the transfer date had a market value of||£12,000|
|400 shares in XYZ at Curtis’s death have a market value of||£12,250|
So there is no loss to be taken into account
|2,100 shares in ABC at the transfer date had a market value of||£30,000|
|2,100 shares in ABC sold on 10 February 2009 for||£25,000|
|Reduction in value||£5,000|
|1,400 shares in ABC at the transfer date had a market value of||£20,000|
|1,400 shares in ABC at Curtis’s death have a market value of||£18,000|
|Reduction in value||£2,000|
The shares in DEF were sold for a profit so there is no loss to take into account and the profit on sale is not offset against the other losses (IHTM14629).
|Original transfer value||£100,000|
|Reduction in value (£3,000 + £5,000 + £2,000)||-£10,000|
|Value on which tax is charged on the death of Curtis||£90,000|
If the taxpayer or agent questions this approach, refer to Technical.
Although the value of £90,000 is used to calculate the tax due on the transfer the original value of £100,000 should still be used to calculate the tax due on later lifetime transfers and the death estate.