Capital gains tax uplift on death

The issue

You may be familiar with the favourable tax treatment, whereby assets held at death attract an uplift to market value for capital gains tax (CGT) purposes. This wipes out any historical gains, ensuring the executors or beneficiary suffer no tax on the immediate sale of that asset. This was introduced to avoid tax charges to both IHT and CGT applying on death, however, it also applies where no IHT would be payable on the estate, due to exemptions. For example, the uplift applies where all assets are left to the surviving spouse, or the assets qualify for 100% Business Property Relief or Agricultural Property Relief.

The negative impact of this is that where HMRC have no interest in valuing the assets (because no tax is due) they argue that because the market value is not ‘ascertained’, the value at the date of death cannot be relied upon on any later sale. It has been highlighted again as a result of the simplification of the IHT reporting on deaths after 1 January 2022.


For deaths arising after 1 January 2022, HMRC have extended some of the ‘excepted estate’ rules.  The result is that some of the smaller estates that previously had to submit short-form IHT forms now only need to supply summary figures of the values of the estate through the probate process. This significantly simplifies the reporting.

One of the extensions applies to the simple scenario of an exempt estate, i.e. where the assets pass to the surviving spouse. The maximum value of the deceased’s estate has been extended from £1m to £3m before any IHT forms are required. (This value includes the assets in the estate and the value of any chargeable transfers in the seven years prior to death.)

The other extensions apply where the transfer of assets on death fall under the available IHT allowances, such as transfers below the nil rate band and (now) the transferable nil rate band. A CGT base cost would never have been ascertained for these assets in any event.

HMRC state that:

• If the tax threshold was not exceeded on the death, or
• The shares passed on death to an exempt beneficiary such as the deceased’s spouse, or
• The shares qualified for 100% BPR

the value will not have been ascertained on death and it will be necessary to consider it afresh when the acquisition value is needed for CGT purposes (Shares Valuation Manual 107140).

This may be relevant where the related property rules apply to increase the IHT value of shares, over and above the value that would apply for capital gains tax purposes.


Mr Musk dies owning a 20% shareholding in Elongate Limited, valued on death at £360k. Mr Musk’s wife owned a 7% shareholding in the same company, valued at £84k at the date of her husband’s death.

A 27% holding is valued at £702k.

The value of Mr Musk’s 20% holding in light of the related-property valuation rules is therefore:

(£360k/(£360k + £84k) x £702k = £569k

The ascertained value of Mr Musk’s shareholding at death is thus £569k and not £360k. This inflates the IHT value but reduces possible CGT on any future disposal. Where the shares qualify for BPR, this would be very valuable but of course HMRC will not ascertain the value in this case (above). HMRC would maintain that the CGT base cost is to be determined by the normal CGT market value rule (to give £360k).

Forbes Dawson view

HMRC are supposed to write to advise where values have not been ascertained. This is, in our experience, is not always adhered to, and so it could be a shock for many clients who expect the uplift to apply, as set out above.

Sometimes it is possible to get a value ascertained for BPR shares. For example, in cases where there is some level of investment business HMRC will need to investigate values to ensure that the value of investment business is not 50% or more. Unfortunately, there is little that can be done to agree values on spouse exempt transfers.




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