What is the general rule for determining the date of sale or purchase under IHTA 1984 section 189?

Under the general rule in section 189, the date of sale or purchase of investments is the date on which the contract was entered into, not the date of completion or settlement. This applies to all straightforward sales and purchases made by personal representatives or other appropriate persons for investment relief purposes.

How does section 189 treat the date when an option is involved in a sale or purchase?

Where a sale or purchase results from the exercise of an option, section 189 provides that the relevant date is the date on which the option was originally granted, not the date the option was exercised or any resulting contract entered into. This applies regardless of whether the appropriate person or another party exercised the option.

Why does the date of sale or purchase matter for inheritance tax investment relief?

The date of sale or purchase is critical because the relief provisions in this chapter impose time limits and valuation windows tied to transaction dates. Using the contract date or option grant date rather than the completion date can significantly affect whether a transaction qualifies for relief and how any relief is calculated.

Can you give an example of how the option rule works in practice under section 189?

If a third party is granted an option over estate shares on 10 April 2024 and exercises it on 15 June 2024, the relevant date for the resulting purchase by personal representatives is 10 April 2024 — the date the option was granted — not the exercise date. This pushes the transaction date significantly earlier for relief purposes.

Inheritance Tax Act 1984 section 189

Date of sale or purchase

Section 189 establishes how the date of a sale or purchase of investments is determined for the purposes of the relief provisions in this chapter.

The date of sale or purchase is normally the date the contract was entered into, not the date of completion or settlement.
This applies to all sales and purchases made by the appropriate person (typically the personal representatives).
Where a sale or purchase results from the exercise of an option, the relevant date is instead the date the option was originally granted.
The option rule applies regardless of whether the option was exercised by the appropriate person or by someone else.

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member