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HMRC internal manual

Shares and Assets Valuation Manual

Inheritance Tax: Unadministered Estates

Under the terms of s.91 IHTA 1984, which applies to deaths or transfers on or after 1 January 1985, a person’s interest, whether absolute or limited (for example a life interest), in an unadministered estate, is treated for IHT purposes as a direct interest in the whole or the appropriate part of the net assets constituting the unadministered estate.

Example 1

A is entitled to one-third of the residue of the estate of X. The estate of X is unadministered at the death of A in 1999. It includes 300 shares out of the 500 issued in NQ Ltd. The estate of A at his death is treated for IHT purposes as including 100 shares in NQ Ltd.

Note that the 100 shares treated as included in A’s estate fall to be valued on A’s death as a 20% minority interest notwithstanding that the estate of X includes a 60% control holding.

Example 2

The facts are as at Example 1, but A also has in his free estate 125 shares of NQ Ltd. The estate principle applies and a valuation of 225 shares is required. The value of the 225 shares is apportioned rateably between A’s holding of 125 shares and the 100 shares which are part of the holding in the unadministered estate.

Example 3

The facts are as at Example 2 but A’s wife is also entitled to one-third of the estate of X. The combined effect of s.91 and the related property provisions results in the aggregation of the wife’s holding and a valuation of 125 + 100 + 100 = 325 shares. The value of the holding is again apportioned rateably between the constituents. The 225 shares which A owned or is treated as owning under s.91 are valued as part of a holding of 325 shares.

Entitlement to business relief, agricultural relief and instalments is determined as if the person held beneficially in his own name the shares to which he is deemed to be entitled by virtue of s.91 subject only to the requirements on ownership and occupation shown in Chapter 111 of this manual at SVM111060 and Chapter 22 of the IHT manual at IHTM22022. [See also ss.107 and 108 IHTA for modifications of the two-year ownership test in s.106.]

In cases of doubt or difficulty over the precise valuation requirements clarification or confirmation should be sought from the IHT caseworker.

  Additional Guidance: SVM150000