Changes in shareholdings: acquisitions prior to sale
There are special rules that apply when the appropriate person (IHTM34161)
- acquires, by purchase or otherwise, investments of the same description as qualifying investments (IHTM34131) in the death estate, and
- then sells part of the combined holding.
In these circumstances the sold shares are apportioned between those held at the time of death and those that are subsequently acquired, IHTA84/S185.
The Gemini trust fund has 15,000 HSBC ordinary shares at the deceased’s death. After the death a further 10,000 of these shares are given to the trustees to hold on the trusts of the settlement. The total trust holding is now 25,000 HSBC ordinary shares. The trustees subsequently sell 5,000 of the shares within a year of the death.
Under IHTA84/S185 (1) the trustees are treated as selling 3,000 of the shares held at death and 2,000 of those that were subsequently placed on trust.
The calculation used in this case to establish how many of the sold shares were held at death is:
15,000 ÷ 25,000 ×5,000 = 3,000
Broadly speaking two investments are not of the same description if they are separately quoted on a stock exchange IHTA84/S180 (3) states when investments are not treated as being of the same description .
Only shares that a person acquires in the capacity of personal representative or trustee are affected by this provision. Any shares acquired in a personal or other capacity are not taken into account.
If the additional shares are purchased, you will also need to consider the impact of the restriction on relief for purchased shares in IHTA84/S180. You can find more information about how S180 restricts the allowable loss at (IHTM34211). There is an example that shows what happens when both S180 and IHTA84/S185 apply at (IHTM34215).