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HMRC internal manual

Inheritance Tax Manual

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HM Revenue & Customs
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Attribution of values to specific investments: example of how values are revised under IHTA84/S187(3)

At the date of death the deceased owned qualifying investments in four companies, A, B,C and D plc. The personal representatives sold all the shares within 12 months of thedeath. The values on death and at the date of sale, together with the losses or gains madeare shown in the table below

Qualifying investments Value on death Sale value Gain/(loss)
       
2,000 shares in ‘A’ £2,000 £1,600 (£400)
1,500 shares in ’B’ £2,200 £2,400 £200
1,000 shares in ‘C’ £5,000 £4,000 (£1,000)
500 shares in ‘D’ £2,000 £2,000 Nil
  £11,000 £10,000 (£1,200)

The personal representatives purchased £5,000 of qualifying investments in the periodbetween the date of death and two months after the date of the last sale.

Because of IHTA84/S180 the loss on sale is reduced by the ‘relevant proportion’(IHTM34212)

£5,000  x 1,200    = £600
     
£10,000    

The loss on sale relief is therefore reduced to £600 (£1,200 - £600).

The revised value of the shares in ‘A’ is £1,600 plus an amount equal to the‘relevant proportion’ of the difference between the value on death and the saleprice, which is £1,600 + [(£5,000/£10,000) x £400] = £1,800.

The revised value of the shares in ‘B’ is £2,400 less an amount equal to the‘relevant proportion’ of the difference between their value on death and thesale price, which is £2,400 – [(£5,000/£10,000) x £200] = £2,300.

The revised value of the shares in C is £4,500, calculated in a similar way as for A.There is no change in the sale price for D.