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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Changes in shareholdings: rights taken up and sold

If the ‘appropriate person’ (IHTM34161) take up the rights issue and sells the allotted shares within 12 months of the death

  • the additional shares are brought into account in the same way as for a bonus issue (IHTM34185) (this constitutes a new holding), IHTA84/S183 (2), and
  • the price of the additional shares is added to the date of death value (this provides the value on death for the new holding), IHTA84/S183 (3).


The deceased has 1,000 BP shares valued at 540p per share, or £5,400 for the holding. There is a rights issue of 1 share for every 5 held at 440p per share. The executors take up the rights, for which they have to pay £880. There is now a new holding of 1,000 + 200 = 1,200 shares. The value on death of the new holding is £5,400 + £880 = £6,280.

  1. If all 1,200 shares are sold for 490p per share, the gross proceeds are £5,880 and the loss on sale is £400.

  2. If the executors sold only 600 shares at 490p per share, the sale value is £2,940. The date of death value is ½ (£880 + £5,400) or £3,140. The loss on sale is £200.In strictness the formula (

IHTM34183) IHTA84/S183 (5) applies to (b) but in a straightforward example such as this will give the same result

  Vs(H – S) = 2,940(6,280 – Nil) = 3,140 (date of death value of shares sold)
  Vs + Vr 2,940 + 2,940  

The formula is only of help when there are several sales after a rights issue and you are dealing with the second or subsequent sale.