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HMRC internal manual

Inheritance Tax Manual

Changes in shareholdings: investments forming part of the new holding

The legislation does not clearly indicate what figure to take for the unadjusted value in respect of investments forming part of a new holding resulting from a transaction under IHTA84/S183. By analogy with IHTA84/S187 (5) - see also the instructions on the attribution of values (IHTM34240) - you should take

  • a proportion of the unadjusted value of the new holding (which is the same as the unadjusted value of the original holding)
  • based on the respective values on death of the investments sold or exchanged and of the new holding.


A trust fund includes 1,000 A Ltd shares valued immediately before death at £1,000. Two months after the death the trustees take up a 1 for 2 rights issue at £1 per share (paying £500). There is now a new holding of 1,500 shares and the date of death value of £1,500. Six months later they sell half the holding for £200.

Applying the formula in IHTA84/S183 (5), the value on death of the investments sold is

£200 x (£1,000-£0) = £750  

Apart from IHTA84/S188, the loss of sale would be £750 - £200 = £550.

But since this exceeds the unadjusted value of

£ 750 x £1,000 = £500

The relief is restricted (IHTM34230) under S188 and the sale value is treated as:

£750 - £500 = £250, making a loss of £500.

You should refer any case where this approach is resisted to Technical (IHTM01081).