The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Where an inheritance tax (IHT) liability arises, it is computed by reference to the value of the property ‘transferred’. On the occasion of death, the whole of the deceased’s estate is deemed to have been transferred immediately before death. This is the aggregate of all the property owned at that time. There are two aspects to determining the value on which tax is charged:
the first consideration is the stand-alone value of distinct items of property
the second consideration is whether the value of individual assets must be determined in relation to other assets
IHTA 1984, ss 1, 4
The general principle is that property is valued for inheritance tax purposes at the price which it might reasonably be expected to fetch if sold in the open market at the relevant time. That price is not to be reduced on the grounds that the whole property is to be placed on the market at the same time. For example, a valuation may be necessary for a large number of shares in a listed company. The number of shares is large enough to result in a drop in the price of those shares to cover the potential risk of a lack of buyers if the shares were to be placed for sale at the same time.
In order to apply this rule in practice, you may need to employ the services of a professional valuer.
Also see Simon’s Taxes I8.201 and I8.204.
The general principle is further refined where:
there is a restrictionon freedom to dispose of the property
the value of the property changes as a result of death
liabilities are to reduce the value of the property transferred
Where the transferor has entered into a contract that imposes a restrictionon the disposal of any of his property (eg an option contract), that restrictionis ignored in valuing the property in question. Restrictions may arise, for example, under a company’s Articles
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