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HMRC internal manual

Inheritance Tax Manual

Lifetime transfers: specific lifetime reliefs: shares and securities: changes in shareholdings

One of the conditions for relief is that the transferred asset is retained by the transferee (or their spouse or civil partner (IHTM11032)) until the death of the transferor or an earlier qualifying sale.

So the relief could be lost if the asset consists of a holding of shares which becomes a different holding, as a result of a reorganisation of share capital for example. IHTA/S135 preserves relief if the ‘new’ holding results from a transaction to which TCGA92/S127 applies or would apply but for TCGA92/S134

Broadly, this covers

  • a reorganisation of share capital within TCGA92/S126(1)
  • a conversion of securities within TCGA92/S132
  • the issue of shares or debentures in exchange for the shares or debentures of another company in circumstances such that TCGA92/S135 applies
  • the issue of shares under an arrangement within TCGA92/S136, which deals with reconstructions and amalgamations
  • transactions corresponding to the above in respect of unit trust schemes - TCGA92/S99.

When TCGA92/S135 applies,

  • treat the original holding and the new holding as the same asset
  • if the transferee (or their spouse or civil partner) provided any consideration for the new holding, reduce the market value at the date of death or sale by the amount of the consideration.


Clarissa transfers 20,000 shares in GHI Plc to her daughter Anna on 5 November 2011. The shares were valued at £20,000. On 1 March 2012 Anna took up a 1 for 2 rights issue at £1 per share, paying £10,000. She now had a new holding of 30,000 shares in GHI Plc valued at £30,000.

On 30 July 2012 Anna sold the holding of 30,000 shares for £25,000. Clarissa died on 1 December 2012 and Inheritance Tax (IHT) is payable on the gift of the shares.

For fall in value relief the value of the shares at the date of sale (£25,000) is reduced by the consideration paid by Anna (£10,000) to £15,000. The fall in value is £5,000.