Does anyone know if there is any HMRC guidance or good practice as to how many valuations they require when an estate is taxable? A colleague is of the opinion that they require 3 as a comparison but is mindful that particularly when land is being valued it can create a significant expense for the estate. I have executors who are insisting only 1 valuation is required. Will this create an issue when the IHT400 is submitted?
Iain Robson
Close Thornton
It’s not so much number as quality. I deplore the tendency of clients to get free estate agents marketing appraisals and present them as if valuations. An estate agent is looking to gain business, or occasionally, to discourage it. Either way he is looking forward to what the property might sell for some months ahead, when what you want is a backwards look at what it was worth when the death or transfer of value occurred.
If the property is being sold immediately an estate agents appraisal is fair enough- most clients resist paying a fee for a professional valuation based on historic sales data and some consideration of planning potential by someone with PI insurance; even though for the timid it gives them an excellent defence if the property sells for much more and penalties are in issue! The tax tribunal decision in Cairns is well worth reading, particularly as HMRC lost on the main issue of negligence. One of the Trust and Estate Newsletters also has a piece about what HMRC expect to see in a valuation.
If the executors are as is usual not inclined to incur the expense of professional valuation I usually recommend taking the highest of two or three estate agents and discount by 10%, but I make it very clear to the executor clients that this sort of approach has rebounded in the past.
The other point to make is that the District Valuers are (thanks to the internet) aware of what is on the market and I have recently had a call from one querying a valuation when the executors had put a property on the market for much in excess of the declared value.
Tim Gibbons
It’s all about quality, not quantity!
One valuation from a member of RICS is always the safest bet where IHT is at issue.
Charlotte Ponder
Countrywide Tax & Trust Corporation Ltd
I would agree with Tim about averaging three estate agent guesses and then discounting because they usually give an asking price not an open market value. I prefer to instruct a FRICS who will give a proper valuation with a statement of truth acceptable to the District Valuer, backed up by PII.
Iain Cameron
Star Legal
HMRC "strongly advises in the IHT Toolkit using a surveyor applying RICS principles
I seem to remember there was a discussion in the Inheritance tax and Trusts newsletter a few years ago, when they admitted the possibility in lower risk cases that people could rely on Estate Agents’ valuations but recommended that three valuations be obtained.
Bruce Hogarth-Jones
Plantagenet Partners LLP
Here’s a link to that old Inheritance Tax and Trusts Newsletter
http://webarchive.nationalarchives.gov.uk/20110109132006/http://hmrc.gov.uk/cto/newsletter-aug09.htm
Bruce Hogarth-Jones
Plantagenet Partners LLP
Please bear in mind the following oft-cited quotation from the judgment of Nolan LJ in Target Home Loans v Clothier, [1994] 1 All ER 439 at 445 f :
“I mean no disrespect to the estate agency profession when I offer the suggestion that they would win by a distance any competition between members of different professions for optimism. Any such letter must be viewed with reserve if it is to form the basis of a decision involving real money.”
Clifford Payton
Alpha Court Chambers