Finance Act 1975

Effect of changes in a holding between death and sale

27 (1) This paragraph applies in any case where, within the period of twelve months immediately following the date of the death in question, there occurs it relation to any qualifying investments comprised in the deceased's estate immediately before his death (in this paragraph referred to as "the original holding") a transaction to which paragraph 4 of Schedule 7 to the [1965 c. 25.] Finance Act 1965 applies, that is to say—

(a) a reorganisation, within the meaning of that paragraph, or reduction of the share capital of a company; or

(b) the conversion of securities within the meaning of paragraph 5 of that Schedule ; or

(c) the issue by a company of shares or debentures in exchange for shares in or debentures of another company in such circumstances that paragraph 6 of that Schedule applies ; or

(d) the issue by a company of shares or debentures under such an arrangement as is referred to in paragraph 7 of that Schedule;

or any transaction relating to a unit trust scheme which corresponds to any of the transactions referred to in paragraphs (a) to (d) above and to which paragraph 4 of that Schedule applies by virtue of section 45(8) of the [1965 c. 25.] Finance Act 1965.

(2) Subject to sub-paragraph (3) below, where this paragraph applies the holding of investments which, as the result of the transaction, constitutes a new holding, within the meaning of paragraph 4 of the said Schedule 7, shall be treated for the purposes of this Part of this Schedule as being the same as the original holding ; and references in the following provisions of this paragraph to the new holding shall be construed accordingly.

(3) If, in a case where this paragraph applies, the appropriate person gives, or becomes liable to give, as part of or in connection with the transaction concerned, any consideration for the new holding or any part of it, then, for the purposes of sub-paragraph (5) below, the value on death of the new holding shall be treated as the aggregate of—

(a) the value on death of the original holding, and

(b) an amount equal to that consideration,

and in any other case the value on death of the new holding shall be taken to be the same as the value on death of the original holding.

(4) For the purposes of sub-paragraph (3) above, there shall not be treated as consideration given for the new holding or any part of it—

(a) any surrender, cancellation or other alteration of any of the investments comprised in the original holding or of the rights attached thereto, or

(b) any consideration consisting of any application, in paying up the new holding or any part of it, of assets of the company concerned or of any dividend or other distribution declared out of those assets but not made.

(5) If, in a case where this paragraph applies, the appropriate person sells, within the period referred to in sub-paragraph (1) above, any investments comprised in the new holding, the value on death of those investments shall be determined by the formula—

where—

• Vs is the sale value of the investments,

• Vr is the market value at the time of the sale of any investments remaining in the new holding after the sale,

• H is the value on death of the new holding, and

• S is the value on death of any investments which were originally comprised in the new holding but have been sold on a previous occasion or occasions.

(6) Sub-paragraph (2) of paragraph 24 above shall apply for the purposes of sub-paragraph (5) above as it applies for the purposes of that paragraph.