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HMRC internal manual

Inheritance Tax Manual

Transfers on death: meaning of 'unquoted' for instalments

The meaning of the term “unquoted” for instalment purposes has not been constant and has diverged from the general definition provided by IHTA84/S272 -as introduced by the FA 1987 with effect from 17 March 1987. F(No.2)A 1992, with effect from 10 March 1992, provided a separate definition for both Business Relief (IHTM25131) and instalment purposes under which shares dealt in on the USM (IHTM18339) were treated as unquoted.

With effect from 1 April 1996 the word “quoted on a recognised stock exchange” in IHTA84/S227 (1AA) and in IHTA84/S272 was replaced by the word “listed”. Furthermore the distinction between the USM and a recognised stock exchange was rendered largely irrelevant with the demise of the former at the end of 1995. The term “recognised stock exchange” was defined by TA88/S841, but with effect from 28 November 2001 HMRC adopted a revised interpretation. Advice on whether particular stock exchanges can be accepted as within the interpretation can be obtained from SAV (Foreign). Shares dealt in on the USM and on its replacement, the Alternative Investment Market (IHTM18336), are unquoted, whilst shares traded on NASDAQ (IHTM18341) are quoted as from 10 March 1992. Following the revised interpretation shares admitted to trading on EU “junior” markets and on NASDAQ Europe (IHTM18341) are regarded as unquoted.

With one exception the point will rarely arise since, with effect from 1 April 1996, all unquoted shares will qualify for 100% Business Relief unless they fall within IHTA84/S105(3). If they fall within that section, or are as described in IHTA84/S105 (4) (see IHTA84/S234 (2) and IHTA84/S234 (3)(a)), they will only qualify for interest free (IHTM30363) instalments to the extent that the value is treated as reduced by Agricultural Relief (IHTM24000).

The exception is where the unquoted shares would have qualified for 100% Business Relief but for the provisions of IHTA84/S106, i.e. they were not owned by the transferor throughout the two years immediately preceding the date of transfer. In this case the shares will qualify for interest free instalments.