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HMRC internal manual

Inheritance Tax Manual

Restrictions on relief: loss on sale is greater than the original date of death value

It is possible for the loss on sale to exceed the original date of death value (valued on the normal open market basis).  This can occur when there is a payment of call (IHTM34175) by the appropriate person (IHTM34161) or there is a rights issue (IHTM34187), which is taken into account in calculating the value at death.

Where this situation arises, IHTA84/S188 provides for the sale value to be adjusted to ensure that the loss on sale would be equal to the value before relief.


The Clover trust fund includes 1,000 Green Ltd shares valued immediately before the death at £1,000.

Two months after the death the trustees take up a 1 for 2 rights issue at £1 per share.  The holding now comprises of 1,500 shares with a date of death value of £1,500.

Six months later they sell the holding of 1,500 shares for £400.

Apart from s.188 the loss on sale would be £1,500 - £400 = £1,100.

Since this exceeds the unadjusted value (£1,000) IHTA84/S188 applies and the sale value is treated as

         £1,500 - 1,000 = £500.

This makes the loss on sale £1,000, which is equal to the value before the adjustment.