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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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FACET procedures: what checks should you make if a substantial loss has been claimed?

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

You should complete all the checks before referring the form IHT 35 back to the caseworker.

Check Action
a) Check that the sale prices in column B or on any accompanying schedules are within the Extel Business Done range for the date of sale. If they are below the range, and no contract notes are included, you should note on the form 516 that the shares are ‘Outside Business Done range’
b) Have any ex-dividends (xd) (IHTM18110) been included in column A? (This includes unit trusts that are marked individually ‘xd’ at death) If yes, they should be removed and the value of the shareholding without the dividend should be included.
c) Were any shares marked ‘Xcap’ at the date of death? This indicates that the company is giving ‘free shares in lieu of a dividend as a Cap or Scrip issue’. Check that the date of death holding in column A includes the additional shares. You should advise the caseworker on form 516 that

‘Company was Xcap at death – (insert details of Cap/Scrip option from Extel ‘black book’ and/or ‘supplement’).

Consequently dividend at death now £X and holding of shares is now Y increasing value to £X. Amendment of date of death value in estate may now be necessary ‘if worth’    
  d) Are any Government securities marked ‘1k’ or ‘1k-xd’ at the date of sale? If marked ‘1k’, include interest accrued at the date of sale in the gross sale proceeds.

If marked ‘1k-xd’ the gross proceeds is the sale price payable less an amount equal to the gross interest accruing from the date the bargain was done to the interest payment date.

If the interest has been treated incorrectly you should notify the caseworker on form 516.    
  e) Check in Extel to see if any Calls, Bonus, Rights and Cap or Scrip issues were made between the date of death and the date of sale(s). If so, you will need to calculate to amend the form IHT 35 to reflect the changes. You will find separate instructions on how to deal with
  • call (IHTM34101)
  • bonus issues (IHTM34103)
  • rights issues (IHTM34104) Any Cap or Scrip issues should be added to the sale proceeds.    
      f) Check all proceeds figures in column B to make sure that gross proceeds have been included. You do this by multiplying the number of shares by the share price. If one figure is incorrect this may simply be an arithmetic error. If all the figures are incorrect then it is possible that the net proceeds of sale have been included. In either case the form 516 and form IHT 35 should be returned to the caseworker. The 516 should state which shares have been incorrectly valued or if all the values seem to be incorrect it should state ‘it appears that the net proceeds of sale have been included rather than the gross proceeds’.
      g) Has the question in part 2 been ticked ‘Yes’? Refer to the instructions on purchase of shares (IHTM34098).
      h) Have any of the questions 3(a) to 3(e) been answered ‘Yes’? Refer to instructions on
  • exchanges (IHTM34099) – if ‘Yes’ to 3(a)
  • capital payments (IHTM34100) – if ‘Yes’ to 3(b) (IHTM34100)
  • call (IHTM34101) – if ‘Yes’ to 3(c)
  • changes in shareholdings (IHTM34102) – if ‘Yes’ to 3(d)
  • options (IHTM34105) – if ‘Yes’ to 3(e)and amend figures on form IHT 35 as necessary.    
      i) Check the arithmetic throughout form IHT 35 including total loss or gain. If incorrect you should amend the IHT 35 taking care to ensure that the original figures remain legible.