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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Valuing the partnership interest: Partnership share

Following the judgement of Hoffman LJ in the case of Gray v IRC [1994] STC 360, at p.377c, the valuation of an interest in a business carried on as a partnership should be by reference to the value of the appropriate share of each asset.  The previous practice of allowing a discount for the costs of sale is effectively overturned by this decision.  That earlier treatment had been based on the general law definition of a partnership share as a proportionate interest in the partnership assets after they have been converted into money, and all the partnership debts and liabilities have been paid and discharged.

In the valuation of an interest in an agricultural tenancy held for the benefit of a farming partnership, the Lands Tribunal made no allowance or discount in calculating the value of a deceased partner’s interest - John Hedley Walton (junior) v IRC [1996] STC 68.


In the absence of express provision in the partnership agreement, all the partners have an interest in the entirety of the partnership property but no partner has the right to any particular asset or assets comprised within the partnership property to the exclusion of the other partners. “What is meant by the share of a partner is his proportion of the partnership assets after they have all been realised and converted into money, and all the partnership debts and liabilities have been paid and discharged.” (Lindley & Banks on Partnership 18th Edition at p 518 et seq.) One consequence of this is, that notwithstanding that the partnership assets may include heritable property, nevertheless the partner’s share in the partnership is moveable for the purposes of succession. It is a mere right to a debt rather than an undivided right. (See Miller on Partnership, 2nd Edition at p 199.)

If the partnership was an agricultural tenant, please see the decision in Baird’s Executors v CIR 1991 SLT (Lands Tribunal) 9. The court accepted that the value of an agricultural tenancy in Scotland is the market value, IHTA84/S160.

Any case where the decision in Baird appears to be material should be referred to Technical.