IHTM34213 | Restrictions on relief for purchases: purchases by the ‘appropriate’ person

Purchases by a legal personal representative or trustee

When a personal representative or trustee makes a claim for relief, the restriction applies if

• during the period beginning on the date of death and ending two months after the date of the last sale taken into account in calculating the loss

• the claimant purchases any qualifying investments (IHTM34131) in the same capacity in which he makes the claim, IHTA84/S180 (1).

Purchases by an appropriate person who is not a legal personal representative or a trustee

When an appropriate person (IHTM34161) who is not a personal representative or trustee makes the claim for relief, the restriction applies if:

• during the period beginning on the date of death and ending two months after the date of the last sale taken into account in calculating the loss

• the claimant purchases qualifying investments of the same description as one of the investments included in the claim

• when acting otherwise than in the capacity of personal representative or trustee, IHTA84/S180 (2).

In considering whether two investments are of the same description you should see IHTA84/S180 (3). But broadly speaking two investments are not the same if they are separately quoted on a stock exchange.

Purchases made by Investment Managers acting under an Investment Management Agreement (IMA)

Any purchases made by and Investment Manager acting under an IMA have not been made by the appropriate person (IHTM34161) and should be disregarded.

Purchases after a change in capacity

In general the major change in capacity from personal representative to trustee/legatee will only occur when the estate has been fully administered and the residue is ascertained.

However, a change of capacity will occur if an irrevocable appropriation of assets - including cash from the proceeds of shares - is made under either

• specific powers included in the will, or

• the general authority of S41 Administration of Estates Act 1925.

So for example, if

• the personal representatives appropriate investments to the trustees of an existing trust, and

• the trustees then make purchases of qualifying investments using the proceeds from the sale of these investments

then the purchases are not taken into account by the appropriate person when considering an application for a loss on sale relief and the restrictions imposed by IHTA84/S180.

If, however, the trust was established by the Will of the deceased and the executors were also the trustees, in the absence of an assent to the trustees, it is likely that the purchases will be by the appropriate persons in the same capacity. In this case, IHTA84/S.180 will apply.

If this view is challenged by the taxpayers you should refer the claim to Technical (IHTM01081).