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HMRC internal manual

Inheritance Tax Manual

Attribution process: lifetime transfers

In May 2000 T settles the following property on discretionary trust (IHTM16042), the transferee (IHTM30244) paying the tax

  • £160,000 cash


  • 20,000 shares in XYZ Ltd, an unquoted company (the value is £240,000).

The value transferred by the transfer, which is wholly chargeable, is £400,000. The part of this value attributable to

  • the shares is (120,000 ( 200,000) or 3/5
  • the cash is (80,000 ( 200,000) or 2/5.

The part attributable to the shares qualifies for instalments because

  • the transferee is paying the tax
  • the part of the value transferred attributable to the shares exceeds £20,000, and
  • the shares represent more than 10% of the company’s share capital (IHTM30256).

The calculation of the tax immediately payable (there being no previous cumulative total) is:

Lifetime tax on the transfer  of £400,000 = £33,200. This splits into:

  • Two fifths attributable to cash = £13,280 (payable in one sum)
  • Three fifths attributable to shares = £19,920 (payable by instalments).

The transferor dies in February 2002. The additional tax on the lifetime transfer is:

The tax at February 2002 at the full rate = £63,200 less tax (as shown above) - £33,200 = £30,000.  

As the shares are still held by the transferee and remain unquoted at the death, instalments are available for £18,000 - i.e. the 3/5 part of the £30,000 attributable to the shares.