Valuations for Inheritance Tax (Probate)

Whilst some are often content to rely on ‘valuations/market appraisals’ for IHT purposes, there is often a need for a formal RICS valuation report for example where: a share in a property falls to be valued, commercial or agricultural property is involved, there is some prospect of the property being developed, the value in the Estate is above/close to the tax threshold, or there is some element of dispute. However, given the statutory obligation on Executors as outlined below we believe it is best practice to always obtain a formal valuation from an RICS Registered Valuer.

The IHTA 1984 S.216 requires personal representatives to make the fullest enquiries reasonably practicable in order to be able to complete and deliver an account of the estate to HMRC specifying to the best of their knowledge and belief all appropriate property in the estate and the value of that property.

The value of property in accordance with IHTA 1984 S.160 is the price the property might reasonably be expected to fetch if sold on the open market at that time, a definition which differs subtlety from the definition of market value in the RICS Red Book.

The valuer also has to consider whether there is any potential for development and if so to ensure that it is taken into account and reflected in the valuation, because ‘hope’ value’ is a component part of the definition of value, whether or not planning permission has been sought or granted. This takes skill and judgement, with an eye on the planning prospects and on past tax tribunal decisions which have considered how hope value is to be treated.

Lloyd Smale, our RICS Registered Valuer, spent 20 years with the HMRC District Valuer and has the experience needed to guide you through the valuation maze and also, if needed, to undertake negotiations with the District Valuer in order to reach an agreed figure.