The definition of a person’s estate (
IHTM04029) is the aggregate of all
property (
IHTM04030) to which a person is
beneficially entitled, (
IHTM04031) except that the estate of a
person immediately before his death does not include excluded
property. (
IHTM04251)] This means that in valuing
an estate, items of property may be taken together, even if held
under separate titles and whether or not all the various parts of
the estate are chargeable to tax, see
IHTM04331. This aspect of valuation
applies mainly to unquoted shares, to interests in land, undivided
shares of property and 'sets' such as a herd of pedigree cattle or
an art collection.
Example
The deceased owns a ½ share of a house with the other
held by the trustees of settlement in which the deceased has a life
interest. The house is worth £200,000 with each half share
valued at £90,000. The deceased is beneficially entitled to
the whole of the house so the full £200,000 is charged to tax,
with each half share valued as an arithmetic share of the whole.
It is often said that in order to sell either half share, the
co-operation of the other joint owner is required and so a discount
should be allowed to compensate for the uncertainty involved.
Whilst in reality this may be true, for IHT purposes the statute
imposes the hypothesis that the deceased is beneficially entitled
to the whole and it is the whole that is valued in accordance with
IHTA84/S160. If tax is only chargeable on a fractional share
(because, say the other share is exempt) it is the arithmetic
proportion that is taxed and not the value of the share
involved.
