Transfer of value

In this lesson

1. 0:00 Transfer of value and diminution principle
2. 0:34 Calculating transfer of value step by step
3. 1:09 Worked example: share gift valuation
4. 2:46 Capital gains tax versus inheritance tax treatment

About this lesson

The transfer of value is simply the reduction in the donor's estate as a result of making a gift. Rather than looking at what the donee receives, inheritance tax focuses on how much poorer the donor has become. You'll work through the key calculation method: establish the value of the donor's estate before the gift, calculate its value after the gift, then find the difference. This approach applies to most lifetime gifts, though straightforward gifts like cash are valued at face value. Using a practical example involving share transfers, you'll see how this principle works in real scenarios. When a shareholder gives away shares in an unquoted company, the transfer of value isn't simply the value of the shares given—it's the fall in value of their remaining holding, which can be significantly different due to loss of control premiums. This distinction is crucial for exam success and understanding why inheritance tax and capital gains tax treat the same transaction differently.

Duration: 3m