Share value for tax purposes

[morestout]

I am my late wife's sole executor and sole beneficiary and she had a sizeable holding in Foreign and Colonial IT. On the day that she died it closed at 553p. On HSBC's paperwork for probate they valued it at 456p but I didn't pick up on it as it made no difference the the form that I was due to fill in and no Inheritance Tax was payable anyway. The shares have now been sold and repurchased in my account and there is a profit during the executorship period as they have gone up to about 590. I have queried HSBC's price of 456 and they say that they have an agreement with HMRC that for probate purposes they value shares at the low for the day plus 1/4 up of the difference between the high and the low. They tell me that, on a day when the market barely moved , the low was 410 and the high 554. I obviously believe that the 410 was a spurious opening price. Can I just use the closing price on the date of death to calculate the tax liability on the proft during the executorship period or am I duty bound to use their probate price. On her other holdings there is very little difference between the closing price and their 1/4 up probate price.

[scrumpyjack]

The 'quarter up' basis for valuing shares ceased in April 2015

http://knowledge.freshfields.com/m/Glob ... _of_listed

Even before then the Revenue's IHT notes stated that they were happy to accept the closing price printed in the National newspapers.

I'm not a lawyer but the common sense treatment is that the probate value you were given was an error and that you should treat the shares as having been acquired by you at the correct value as at the date of death, but disclose in a note on your tax return that you have corrected the error. If you really want to go the whole hog, write a letter to wherever you submitted your IHT return saying there was an error in the valuation used and this has been corrected in the estate accounts but you are not submitting revised IHT forms as there is no effect on the IHT due.

[PinkDalek]

I am my late wife's sole executor and sole beneficiary and she had a sizeable holding in Foreign and Colonial IT. On the day that she died it closed at 553p. On HSBC's paperwork for probate they valued it at 456p but I didn't pick up on it as it made no difference the the form that I was due to fill in and no Inheritance Tax was payable anyway. The shares have now been sold and repurchased in my account and there is a profit during the executorship period as they have gone up to about 590. I have queried HSBC's price of 456 and they say that they have an agreement with HMRC that for probate purposes they value shares at the low for the day plus 1/4 up of the difference between the high and the low. They tell me that, on a day when the market barely moved , the low was 410 and the high 554. I obviously believe that the 410 was a spurious opening price. Can I just use the closing price on the date of death to calculate the tax liability on the proft during the executorship period or am I duty bound to use their probate price. On her other holdings there is very little difference between the closing price and their 1/4 up probate price.

The quarter-up method is still in place for IHT purposes (it was abolished for CGT purposes). Pages 67-68 of the IHT400 Guidance notes here https://www.gov.uk/government/uploads/s ... 0Notes.pdf include:

How to value stocks and shares

You don’t have to get a professional valuation for quoted stocks and
shares. You can value shares quoted on the London Stock Exchange by
finding the price of the shares in the financial pages of a newspaper. ...

The ‘quarter-up’ price

If you use a share valuing service, they will tell you what the end of day
quotation was for each of the shares. The price will appear as a range such
as 1091 to 1101p. To work out the value of the shares, you need to work
out the ‘quarter-up’ price. ...

[Edit: Alternatively, see HMRC's Manual page on the subject https://www.gov.uk/hmrc-internal-manual ... /ihtm18093 which may be easier to read].

However and as indirectly mentioned in the link directly above which I've now included, in your particular situation, I'm not sure the valuation used method is relevant. As far as I'm aware if a market value is used in an IHT return and there is no IHT to pay, then the market value may not have been ascertained for CGT purposes. See https://www.gov.uk/hmrc-internal-manual ... /ihtm09241 onwards for HMRC's views on this. It includes A value is not ‘ascertained’ when property is exempt from IHT ... unless the taxpayer and HMRC expressly agree[d] a figure. The question therefore is whether or not the valuation used was expressly agreed?

For CGT purposes, this seems to be the relevant legislation http://www.legislation.gov.uk/uksi/2015 ... ion/2/made

Shares, securities or strips included in the official UK list

2.—(1) The market value at any time of shares, securities or strips which are included in the official UK list is—

(a)on any day the Stock Exchange is open, the lower of the two prices shown in the Stock Exchange Daily Official List for that day as the closing price for the shares, securities or strips on that day plus one-half of the difference between those two figures, and

(b)on any day the Stock Exchange is closed, that value on the latest previous day on which it was open.

(2) But these Regulations do not apply to determine the market value of shares or securities for the purposes of the Taxation of Chargeable Gains Act 1992 where in consequence of special circumstances the closing prices quoted in the Stock Exchange Daily Official List are by themselves not a proper measure of market value of the shares or securities.

Perhaps your £4.10 spurious opening price is catered for by some of the wording in the legislation!

Incidentally, you say the holding was sizeable but does this result in CGT payable in the Estate (after any available CGT Annual Exempt Amount during the administration period, see 2.2 here https://www.gov.uk/government/publicati ... allowances)?

It is too late now for the F&C holding but, if there are still chargeable assets in the Estate, you could formally assign these to the beneficiary (you) such that there is no chargeable gain in the Estate.

[Bouleversee]

PD - I intend to apply for the APS based on the value of my husband's various ISAs at date of death, but not all the assets themselves as I have to find £325k to pay my children the IHT exempt amount. I want all the allowances to be transferred to my IWeb ISA and eventually whatever remains of the ISA shares after satisfying the will to go into that ISA. I understand that those shares can be transferred into my ISA in specie provided this is done within 180 days of beneficial ownership passing to the surviving spouse, but I am not clear as to when that counts as happening. I won't know what is left for me till I have sold enough shares, added to the cash in the ISAs, to pay my children out according to the will Does the 180 days start from that point or from the date probate was granted (May 16) ? I understand that shares in his ISA can be transferred in specie so presumably there would be no chargeable gains so far as those shares are concerned and no formal assignment would be needed, but what about shares in my non-ISA account with the same manager? Can they also be transferred in specie or do they have to be bed-and-ISAd, subject to the usual charges and subject to cgt? I presume certificated shares would have to be sold and rebought in the ISA. Cgt will presumably be chargeable on gains from shares sold to pay out the children, subject to one year's cgt allowance? I could ring HMRC and ask these questions but if you (or anyone else) happen to know the answers, it might save me a lot of time. I would like to transfer one former ISA from its existing manager to IWeb as an executor transfer before starting any administration as it would make it easier to select which shares to sell and also IWeb's charges are much lower but I'm not sure whether that will be possible. All very complicated and time consuming.

[PinkDalek]

Did you intend to post that on your recent thread below?

Tax during administration period of an estate
viewtopic.php?f=49&t=5440

I mention it in particular as there's a couple or so posts at the end, relating to the Additional Permitted Subscription, you may have missed.

[Bouleversee]

I posted it here without stopping to consider I was butting into someone else's thread and it would have been better to do it on the other board and just refer to this, which I will now do. What caught my attention was the assigning bit. You are right in thinking I had missed a couple of posts there.