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HMRC internal manual

Inheritance Tax Manual

Business relief: Replacement property: Minority holdings of unquoted shares

IHTA84/S107(4), with effect from 6 April 1996, provides that, without prejudice to subsection (1), shares within IHTA84/S105(1)(bb) (i.e. any unquoted shares), which are:

  •  owned by the transferor immediately before the transfer; and
  • would, under TCGA92/S126 – S136 (capital reorganisation, company reorganisation or amalgamation) be identified with other shares previously owned by them,

will have their period of ownership treated as including the period of ownership of the original shares. So if, for example, there was a capital reorganisation just six months before the transfer, but the earlier shares had been held for five years, the period of ownership of the earlier shares would be taken into account if they themselves would have qualified for the relief.

With effect from 5 August 2013, there have been changes to the type of shares which can be held in a stocks and shares ISA. Investors can now invest in shares listed on non-traditional stock exchanges, including AIM. Shares listed on AIM are ‘unquoted’ for Inheritance Tax purposes (IHTM18333). Existing owners of AIM shares need to sell these shares, transfer the proceeds to the ISA and then instruct the ISA manager to acquire the AIM shares. We accept that the provisions of S107(1) apply in these circumstances.