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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Foreign property: securities issued by international organisations: share certificates endorsed in blank

Remember that all UK sited assets are subject to Inheritance Tax. This includes most UK sited shares unless they are excluded property (IHTM04151)

Certificates of many American and Canadian railroads and of certain other companies include a printed transfer form or power of attorney. When this is signed or endorsed by the registered holder it enables the certificates to be transferred by delivery.

Often these certificates are ‘endorsed in blank’. This means the endorsement is to be signed by the registered owner as transferor, and the name of the transferee is left blank.

Dividends are paid by the company to the registered owner, and if these shares have in fact changed hands by delivery, the beneficial owner for the time being recovers their dividends from the registered owner.

Usually the shares are registered in the name of a recognised broker, bank or discount house. These are known in the UK as a ‘good Marking Name’ or, in the USA, as a ‘Street Name’. This helps to make sure that the purchaser receives their dividends with minimum of trouble and risk.

A list of good Marking Names recognised by the London Stock Exchange is printed in the Stock Exchange Official Year Book.

However the beneficial owner can have them registered in their own name, or in the name of some nominee other than a good Marking Name.

The location of the shares for Inheritance Tax purposes is determined as follows:

  • If the registered owner is a good Marking Name, the shares are situated where the register is kept, not where the certificates are found. If the company has more than one register on which the holding could be effectively transferred, and the share certificates are found at the material time at a place where a register is located, the holding is for Inheritance Tax purposes situated at that place - see R v Williams [1942] AC541. Cases where none of the effective registers is located where the certificates are found must be referred to Technical.
  • The location of the shares is determined in the same way if the registered owner is also the beneficial owner, or a nominee of the beneficial owner, or, in the case of settled property, the trustees of the settlement or their nominees.
  • In the cases outlined in the bullet points above we consider that the only legal title the holder has to the shares is their registration as owner. If the owner brings the certificates to the UK they could sell the shares to a UK purchaser, so the equitable interest in the shares would be situated here. But, until the sale takes place the beneficial interest has not been severed from the legal interest so their location has not changed.
  • If the registered owner is neither:

    • a good Marking Name,
    • the beneficial owner, or
    • any of the other persons named above, and
    • the certificates are physically present in the UK at the material time,

the shares are located in the UK for Inheritance Tax purposes, (Stern v The Queen [1896] 1 QB 211).

Certificates of this kind, that do not contain any express obligation or promise, are not specialty (IHTM27079) debts - see the Williams case at [1942] AC 556.