IHTM14626 - Fall in value relief: what is market value?
“Market value” (IHTM09703) is defined as usual for IHT purposes, but you should note that
- the values you compare are the values, (as at the dates of transfer and death or sale) of
- the transferred property itself.
The value transferred by the transfer is not in point, although it many cases it will be the same as the value of the transferred property.
Example
Ajani owns 6,000 shares in a private company with an issued share capital of 10,000 shares. She gives away 2,000 shares reducing her holding to 4,000 shares.
Assuming no reliefs or exemptions are due, the loss to the estate is
|
6,000 shares at £5 |
30,000 |
|
4,000 shares at £3 |
12,000 |
|
Value transferred |
£18,000 |
The 2,000 shares, valued in isolation, are worth £5,000 (£2.50 each) at the date of transfer but only £3,000 (£1.50 each) when A died two years later.
For the purposes of fall in value relief, the value transferred is reduced by £2,000 (£5,000 less £3,000) from £18,000 to £16,000. [end of example]
In valuing the transferred property, take no account of
- any other property owned by the transferor or transferee or
- any “related property” (IHTM09731).
The values of the transferred property at both dates are after reduction by any agricultural or business relief due.
Example
Andrew makes a chargeable transfer of land used by a partnership of which he was a member worth £300,000. After 50% business relief the value transferred is £150,000. When Andrew dies two years later the business is worth only £200,000.
For the purpose of fall in value relief, the values of the transferred property are £150,000 at the date of transfer and £100,000 at the date of death. The value transferred is accordingly reduced by £50,000 to £100,000 in calculating the tax payable by the transferee. [end of example]
Ascertain and agree market values in the usual way, referring to the VOA (IHTM23002), Shares and Assets Valuation and other specialists as appropriate.
Foreign Currency
You can accept a loss on a gift of foreign currency occasioned by a fall in the exchange rates providing there is evidence that the transferee still held the cash at the transferor’s death.
If the taxpayer claims a fall in value on any other foreign property due to difference in exchange rates, refer to Technical Group.
