Restrictions on relief for purchases: the restriction
The restriction is based on the ratio of the cost of the purchases of qualifyinginvestments (IHTM34131) to the aggregate sale value,IHTA84/S180 (1). The formula used to calculate the restriction is
Aggregate value of relevant purchases X loss
Aggregate value of sales
The restriction is deducted from the loss that would otherwise be due.
The estate includes shares that have a date of death value of £12,000. The executorsells them within twelve months for £9,000. Under normal circumstances the loss would be£3,000. But within two months of the last sale the executor purchases other qualifyingshares for £5,000. The loss relief is reduced by
£5,000 X £3,000 = £1,677
The net loss is now £3,000 - £1,677 = £1,333
If the aggregate value of the purchases equals or exceeds the aggregate values of thesales, no relief will be available.