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 拢100,000 to Dima on 5 April 2008. The portfolio consists of:

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

Dima then sells

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

All the sales are arm鈥檚 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鈥檚 death 400 shares in XYZ have a market value of 拢12,250, and 1,400 shares in ABC have a market value of 拢18,000.

Calculating the relief due

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

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

  • Reduction in value = 拢3,000

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

400 shares in XYZ at Curtis鈥檚 death have a market value of 拢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 拢30,000

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

  • Reduction in value = 拢5,000

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

1,400 shares in ABC at Curtis鈥檚 death have a market value of 拢18,000

  • Reduction in value = 拢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 = 拢100,000

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

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

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

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