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HMRC internal manual

Inheritance Tax Manual

Stocks and shares: valuation: rights issues

A rights issue is an issue of shares to existing shareholders. It is similar to a capitalisation issue (IHTM18099), but with a rights issue the shareholder has to pay for the ‘new’ shares, usually at a preferential price.  A shareholder may choose either to purchase the additional shares or to sell the ‘right’ to purchase the shares.

On the first day on which dealings in the ‘new’ shares begins on the stock exchange, the quotation of the ‘old’ shares is adjusted to exclude the benefit of the right to purchase the new shares. 

  • The ‘old’ shares are marked XRts on the London Stock Exchange listings (IHTM18092). 
  • If shares are sold before the XRts marking, the purchaser is entitled to purchase the new shares. 
  • But if the shares are sold after the XRts marking, the original owner is entitled to purchase the new shares. 

If the shares are marked XRts at the date of death, and the ‘new’ shares were purchased, ensure that the deceased’s estate includes the ‘new’ shares, with a deduction for the purchase price if this was not paid until after the date of death.

If the ‘rights’ were sold, ensure that the proceeds of sale are included in the estate.