»Ê¹ÚÌåÓýapp

»Ê¹ÚÌåÓýapp legislation does not clearly indicate what figure to take for the unadjusted value in respect of investments forming part of a new holding resulting from a transaction under IHTA84/S183.  You should take

• a proportion of the unadjusted value of the new holding (which is the same as the unadjusted value of the original holding)
• based on the respective values on death of the investments sold or exchanged and of the new holding.

Example

»Ê¹ÚÌåÓýapp Abacus trust fund includes 1,000 Armitage Ltd shares valued immediately before death at £1,000.  Two months after the death the trustees take up a 1 for 2 rights issue at £1 per share (paying £500).  »Ê¹ÚÌåÓýappre is now a new holding of 1,500 shares and the date of death value of £1,500.  Six months later they sell half the holding for £200.

Applying the formula in IHTA84/S183 (5), the value on death of the investments sold is

£200 × (£1,500 - £0) ÷ (£200 + £200) = £750

Without the provisions in IHTA84/S188, the loss of sale would be;

£750 - £200 = £550.

But this exceeds the unadjusted value which is

£750 ÷ £1,500 × £1,000 = £500

»Ê¹ÚÌåÓýapp relief is restricted (IHTM34230) under IHTA84/S188 and the sale value is treated as:

£750 - £500 = £250, making a loss of £500.

You should refer any case where this approach is resisted to Technical (IHTM01081).