Claiming a loss for IHT on the sale of qualifying investments

I am dealing with an estate in which the deceased’s will left a specific legacy of quoted shares to a chargeable beneficiary free of tax.

These shares have fallen in value and the Executors have asked whether, if sold, the losses could be claimed for IHT purposes reducing the overall tax for the residuary beneficiaries. Having looked at the legislation and the HMRC Manuals I am unsure as to whether this is possible. .

As a specific legacy the shares pass to the legatee on death. Therefore any sale by the executors would need to be on the instructions of the legatee (there are more than enough other assets to meet the administration and tax costs of the estate).

Is this possible? My concern is that the sale is by the Executors as nominees for the legatee (the beneficial interest in the shares already having passed) and not on behalf of the Estate.

Any thoughts gratefully received.

Nigel Scase
Greene & Greene

Much as with property that has fallen in value, you can claim a reduction in the IHT after a sale within certain time limits.

For qualifying investments, I believe that time limit is 12 months. See IHTA 1984, ss. 178-189 for more details.

Taurean Drayak
Elliot, Bond & Banbury

I was interested by this query because I feel it must arise quite often, but have only just had a chance to consider it properly.

There is no express answer to this question in the legislation or the IHT manual in relation to this particular relief. However, there is comment in the manual in relation to the similar relief for loss on sale of land which suggests a claim may be possible in these circumstances, because the wording of the legislation in relation to both reliefs is virtually identical with regard to the appropriate person.

In IHTM33050 it contains the following comment at the end:

“In practice it may be possible to regard a sale as made by the appropriate person if it is made on their behalf. However, no relief can be given if, for example, a personal representative or trustee accounts for tax and then transfers the land to a beneficiary who sells at a loss. The beneficiary cannot claim because they are not the ‘appropriate person’, and the personal representative or trustee cannot claim because they have not sold the land.”

It is of course the first sentence that perhaps offers some hope.

Diana Smart
Gordons LLP