Inheritance Tax - Gifts

weimo

@ 150k no.......140 yes.

I would be going through an agent. Not especially wanted to be a landlord but seems better than putting it in the bank.

getmore4less

OK it's back to do you pay a few hundred and walk a valuer through the work to get a pro valuation in the region you want or even lower.

They only have to knock about £1k of the valuation to pay for themselves if there is 40% tax involved(you offload the penalties* onto their insurance).

A proper valuer will also be able to advise on the building work costs which you probbly need to have done anyway.

* I think you may be over worried about the penalties, just get plenty of info to back up your valuation, if the only recent one was £150k how long was that on the market, how much work, go round and ask them.

weimo

This was in August.......I went and had a look today, no one in though. I'm going to put the value I think in and defend my figure should questions arise.

jimmo

The valuers employed by VOA are all professionally qualified and, as such, their opinion of value is a professional opinion. Nothing more, nothing less and you can object to it but the red tape is somewhat more complex.

Under Self Assessment you are required to make an accurate Return.

To do that you need a valuation. You are quite free to make the valuation yourself, seek informal advice from an estate agent or obtain a professional valuation which will obviously cost you money.

When you submit the IHT Return it will then be subject to risk assessment which will almost certainly include an informal reference to VOA along the lines of “Is there any danger that the property has been undervalued?”

On the face of it there seems to be every danger that the VOA will answer in the affirmative, a formal Enquiry will be opened and you will be invited to negotiate with VOA.

If you can reach agreement with the VOA the tax liability can be determined. If not the valuation issue will need to go to court.

In my days at HMRC valuation disputes were the province of the Lands Tribunal, not the Commissioners, nowadays, the First Tier Tribunal.

Again in my days at HMRC, the Lands Tribunal was the equivalent of the High Court and HMRC would be represented by a barrister with the VOA valuer being called as an expert witness.

That’s a bit of a double edge sword. HMRC would have to pay huge legal bills to present their case, as would you if you were to get a barrister of your own.

Once the valuation issue is resolved HMRC will move on to calculate the correct amount of tax due.

Then, and only then, they will look at penalties if the tax due exceeds your Self Assessment.

If you made your own valuation without seeking professional advice, that will be seen as reckless. Penalty.

If they know you sought professional advice and decided to ignore it, that is worse than reckless. Bigger penalty.

If you obtained a professional valuation before making your Return HMRC will accept that you had done all that you could. No penalty.

See the last bullet point here.

http://www.hmrc.gov.uk/manuals/emmanual/EM5125.htm

John_Pierpoint

If it helps, I have sold two houses subject to IHT.
In both cases it took over an year to sell the houses from the date of death.
In both cases my date of death valuation was referred to VOA.
In one case I had already sold the house and so argued that if the sale price was indexed back to the death price then the death price was correct.
In this case the house had been given a repaint to give it some curb appeal and meanwhile the local market had boomed.
This was in the days when we had access to the Land Registry figures but only by post code not individual properties.
The negotiation consisted of a phone call from a Scottish woman, who was nobody's fool. We had a haggle on the phone. We agreed to split our difference and that was that.

The second case was against the slump of 2008/9 and my valuation from a local estate agent was queried. It did stick out as cheaper than other recent sales BUT that was because it was one of about three houses in the road in its original layout and it had had nothing but an occasional paint job since the 1960s.
I sent the VOA a selection of detailed electronic photos to demonstrate that the place needed a complete make over and a big crane to deliver the steels for an extension over its roof. Thus justifying its "bargain" valuation.
Honour satisfied.

In the event for a long time I could not even get offers to match the death valuation, but luck (or choice of a good estate agent) plus a minor ripple of price increase locally some 12 months later, produced three buyers prepared to pay the asking price so the actual outcome was a modest premium.

There is a blog on one of the accountancy sites, where the executor was put through hell by HMRC in similar circumstances (though involving a property with almost an extra a zero on its valuation when compared to my more modest estate), however as long as you behave in a prompt and straightforward way you would be unlucky to be put through the metaphorical wringer.

http://blogs.telegraph.co.uk/finance/ianmcowie/100020121/house-prices-fall-but-taxman-boosts-iht-receipts-by-challenging-valuations/

http://www.taxationweb.co.uk/tax-articles/capital-taxes/inheritance-tax-and-market-value-at-death-do-not-be-intimidated.html

http://www.taxationweb.co.uk/forum/tax-on-property-value-increase-t35369.html

http://www.bailii.org/uk/cases/UKUT/LC/2010/TMA_455_2009.html

weimo

In my case the problem is that I did not intend on selling the property. Therefore the whole value figure is based on peoples opinions. If I were to sell there would be no issue, I would pay the 40% of whatever was due.

The market would decide the value, a builder/developer would not pay the 150k.......with 25-30k of work.....it is a false economy. Someone who was going to do the work themself may well pay the 150k, all depends whether that said person is out there, if they are HMRC are onto a winner.

A friend of mine who purchases BTL property recently purchased in a probate situation a property in an adjacent village with higher BTL incomes for 30k less than the estimated value, as there was lots of work to be done......and no one was interested at the asking price. If I enter into a situation like this I will have done the whole excercise just for HMRCS benefit which seems unfair.

In terms of 'professional valuations' a friend of mine had one of these as instructed by a Judge as they are currently going through a divorce. The valuation was in excess of 40k of what a property 3 doors away actually sold for 6 months previous same condition. This really shafted my friend as they wanted to buy the other person out, now this is out of the question. Market decides value/price the only way to accurately establish this is to sell the property.

My defence would be a geographically representative property of this construction in good order would sell for a max 175k (sales data available), this property requires 30k work (data can be provided) I simply do not know if this is worth all the aggravation for 4k (additional IHT between the two sales figures).......maybe I will have to compromiseand stay with the woodchip.....

I'm putting the estate agent value down with the outlook to sell. We shall let the market decide.

getmore4less

Based on what you have said I would be looking to put £130k-£135k


As for your friend, the simple solution is they put iit on the market, offers over the price he is willing to pay and wait.

weimo

I will update the post when I know the outcome.