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!
s.274 Taxation of Chargeable Gains Act 1992 provides that where a value has been determined for IHT purposes, that value will apply for CGT purposes.
In the scenario set out, provided that IHT is payable in the estate, and the relief is granted, the new “probate” value will be the acquisition value when determining the estate’s CGT position.
The dealing costs incurred on the sale will result in a loss for CGT purposes when s.179 relief applies, in any event.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
This is my understanding, yes.
Lucy Orrow CTA TEP
Owen, I agree your figures and comments.
Under s179(1)(b) the aggregate sale proceeds are effectively substituted for probate values at death. Thus, actual selling prices (ie 90,90,90 and 110) are substituted for probate values. The selling prices are before expenses.
Had any purchases (ie reinvestment) been made any claim for relief would need to be correspondingly reduced.
Thank you for taking the time to respond: I really appreciate it,
Thank you for taking the time to respond – it is much appreciated,
Thank you very much for your response – it is much appreciated. Thank you for your time.