How is a gift made in 2000 valued for IHT purposes?

Oompa_Lumpa

I started a couple of threads yesterday, and it turns out that the info I had been given was incorrect.

My friend was given a house by his mother in 2000 and she died last month, therefore he didn't quite get the 7 full years that is required for IHT purposes.

So now for the IHT comp we have to know what the value of the gift was in 2000. Now I am aware of the dimuition in value concept, but what I am not aware of is the practicalites of valuing a gift made 6 years ago.

Do you get a valuer to look at the property today and ask him what the valuation would have been in 2000, or would the solicitor as a matter of course have recorded the value at the time the transfer was made?

oldwiring

I would think a valuer would be good to approach, but I also feel the District Valuer would also have to accept the valuation. To obtain a DIY valuation based on house price inflation in the six years you might find the Land registry site useful

http://www.landreg.gov.uk/propertyprice/interactive/

Oompa_Lumpa

Thanks.

How do you get the DV to accept the valuation? Do you ask him to confirm it before the IHT is settled, or do you just submit your IHT forms and he checks some of them randomly?

Petmidget

Most decent surveyors will be able to do a retrospective valuation, the DV who is also likely to be a qualified surveyor will check and generally accept the value if there are no shenanigans going on (messing with valuation for other reasons)

Your friend might have a bigger problem now having read all your threads, as the gift will be subject to IHT, though at roughly 6 years ago a decent amount of taper will be available 60/80% depending on timing, as in the loss to donor principle might see a considerably larger amount assigned to gift as the overall plot is worth more.

But I can see this working in your favour, as gift of a higher value would reduce estate value at death. I think this is probably getting too complex for a forum and your friend needs to put all the paperwork in front of a professional.

Oompa_Lumpa

Petmidget, thanks for your help.

I agree with you re the professional. I am an accountant, but not a tax adviser - just work in industry.
Therefore I have a rough idea of the issues involved, and I firmly belive that when he sees a tax adviser that he has a proposed plan in place, and go to the tax adviser to shoot it down or come up with something different.
That is all I am doing here.

The other side of it is never having used a tax adviser in his town before I'm not really thrilled at the thoughts of looking for one through the Yellow pages, hence why I am trying to get a rough idea of what are the issues before we approach someone.

Petmidget

I cant really recommend how you find a local decent tax adivsor, any body who asks me that question gets the reply "your looking at one" but I would say you need someone who has considerable experience in IHT/CGT interaction preferably a CTA. Experience in land transactions involving a redevelopment uplift would be useful aswell.

If you are in the industry do you not know someone or a firm that has a decent reputation in these areas.

Also is distance an object other than meeting the protaginists initially to ascertain a good client/advisor fit (not a good idea to have an advisor who you think is a bit of a twonk) then remainder can be done by post and phone. All the dealing wiht HMRC will be remote, DV are regional, IHT are only based in Nottingham and Edinburgh, CGT may be handled locally but may not.

Mary_Hartnell

Hi Oompa Lumpa,

I'm not sure how far back you can go at the individual or partial post code level on the Land Registry web site so
for what it is worth, I had the situation of having to value a house left in varying proportions to 5 different people (I was the executor and one of the beneficiaries)

This was back in 1997, when the Land Registry had only recently started to disclose its figures at post code level, and at a time when values were shooting up on the west side of London.

So we held onto it for as long as reasonable (Council tax, fear of frosts and squatters tend to push you into a sale !), thus generating a capital gain for most beneficiaries less than their annual allowance. My objective was to get as much as possible of the sale value into the CGT & IHT zero-rate/exempt bands.

I then churned out a load of statistics by post codes to show the increase from date of death to date of sale from the Land Registry and sent off my valuation (as I saw it!) to the Capital Taxes Office. The district valuer came back with a valuation 20K higher so we had an argument on the phone and in effect split the difference.

If you are confident about the house being a reasonably "standard" design for the district, you could check the actual recent sale price for a number of dopplegganger houses on "nethouseprices" and then index that back 6 years; checking with local papers of the time to see if you have got it right. Bare in mind asking prices can be 5-10 percent higher than actual prices depending on market conditions.

Hope this helps; let us members know how you get on.

Mary.

PS I think the professional valuers hate us ordinary mortals being able to argue the point - I remember a similar situation with a doctor who made a wrong diagnosis of my son's "8 month" hearing test.