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HMRC internal manual

Inheritance Tax Manual

Changes in shareholdings: rights sold

If the appropriate person (IHTM34161) sells the rights, the sale proceeds are added to the gross proceeds of sale of the original holding to see if relief is due, IHTA84/S181.

Example

Jeremy has 1,000 BP shares valued at 540p per share.  There is a rights issue of 1 share for every 5 at 440p per share.  The executors sell the rights for £180.  They then sell the 1,000 shares for 490p per share within 12 months of death.

The date of death value has to be compared with the sale proceeds of both the rights and the shares themselves.  £5,400 is compared with £4,900 + £180 (£5,080).  The loss on this particular item is £320.

If only half the holding has been sold, IHTA84/S181 would only require that proportion of the capital receipt to be brought into account.  The loss would be £2,700 – (£2,450 + £90) = £160.