I would be grateful for some thoughts on the following:
As a hypothetical example: if there are 5 shareholdings in an estate, and each shareholding is valued at the date of death at £100 each, and six months later at the date of sale four of them are sold for £90 and one for £110, my understanding is that the IHT loss relief is based on the overall loss of all the shares that are sold. In this example, the overall loss is £30, and the IHT therefore would be reduced from £200 (40% of £500) to £188 (40% of £470).
Further, my understanding is that, under s. 187 of the Inheritance Act 1984, the new base value for each shareholding that is sold is, for CGT purposes, the sale price of each share. And that this is the case even if a shareholding has increased in value. (In this example, although one shareholding had increased in value by £10, this particular shareholding has a ‘new’ base value of £110 and therefore has not experienced a ‘gain’ for CGT purposes.)
Therefore, as a result, the estate’s CGT allowance in this example would still be completely unused and could be applied against other assets. Similarly, there are no ‘losses’ that could be used to offset against other gains (as the shares that reduced in value have a new base value for CGT purposes - the ‘loss’ has already been taken into account for IHT purposes.)
Any thoughts welcome!