IHTM14631 - Lifetime transfers: specific lifetime reliefs: fall in value relief: not all of the transferred assets are sold

Where some of the property transferred has been sold and some remains unsold then the relief is calculated in a similar way to where there is more than one sale (IHTM14630). The relief is calculated separately for each asset sold for a loss and for each asset which has a lower market value at the date of death than at the date of the lifetime transfer.

Example

Curtis transfers a portfolio of shares valued at £100,000 to Dima on 5 April 2008. The portfolio consists of:

  • 1,000 shares in company XYZ worth £30,000
  • 3,500 shares in company ABC worth £50,000, and
  • 1,750 shares in company DEF worth £20,000.

Dima then sells

  • 600 shares in XYZ on 5 January 2009 for £15,000
  • 2,100 shares in ABC on 10 February 2009 for £25,000
  • 1,750 shares in DEF on 12 March 2009 for £22,500.

All the sales are arm’s length transactions at open market values.

Curtis dies on 4 March 2010 so that the transfer becomes a chargeable transfer and Dima makes a claim for fall in value relief.

At the date of Curtis’s death 400 shares in XYZ have a market value of £12,250, and 1,400 shares in ABC have a market value of £18,000.

Calculating the relief due

600 shares in XYZ at the transfer date had a market value of £18,000

600 shares in XYZ sold on 5 January 2009 for £15,000

  • Reduction in value = £3,000

400 shares in XYZ at the transfer date had a market value of £12,000

400 shares in XYZ at Curtis’s death have a market value of £12,250

  • So there is no loss to be taken into account.

2,100 shares in ABC at the transfer date had a market value of £30,000

2,100 shares in ABC sold on 10 February 2009 for £25,000

  • Reduction in value = £5,000

1,400 shares in ABC at the transfer date had a market value of £20,000

1,400 shares in ABC at Curtis’s death have a market value of £18,000

  • Reduction in value = £2,000

The shares in DEF were sold for a profit so there is no loss to take into account and the profit on sale is not offset against the other losses (IHTM14629).

Original transfer value = £100,000

Reduction in value (£3,000 + £5,000 + £2,000) = -£10,000

Value on which tax is charged on the death of Curtis = £90,000

If the taxpayer or agent questions this approach, refer to Technical.

Although the value of £90,000 is used to calculate the tax due on the transfer the original value of £100,000 should still be used to calculate the tax due on later lifetime transfers and the death estate.