Property valuation for Probate.

slowpoke_rodriguez

Can someone please help clear up my confusion?

My father died before Christmas last year. I inherited his house which forms the majority of the estate.
As I understand , the valuation for Probate is based on it's valuation at the time of death, and must pay due regard to any development potential. It undoubtedly has potential as it is unmolested since the 1960s, has a reasonably sized garden and is the smallest house in the (desirable) street by some margin.

It was valued for probate purposes in January by five separate local estate agents, whose valuations varied by no more than 10% and all suggested it could be extended under permitted development by roughly 50%.
We took an average of these valuations and submitted this value for probate.
Probate has been granted though apparently the house value has not been agreed.
My (simplified) belief was that we submitted a value and either it was accepted or we argued about it with the taxman until it is decided. IHT is then due on this value once sold, or 10% per year. Any increase in value over this (currently rising at 10%+, apparently) is covered by Capital Gains Tax.
According to the solicitor handling the estate (executor in will) the value doesn't get decided until the property is sold. Is this so?

I am contemplating applying for planning permission, or Cert of Lawfulness to extend, and may even develop the house if feasible.

Firstly, when does the development potential cease to be 'at time of death', and recognise that the potential has been enhanced? At granting of Cert of lawfulness? Planning Permission? Actually building?

Secondly, how specific is 'At time of death'? Within a week, a month, 6 months?
It could be argued that as time of death was just before Christmas, potential purchasers were fewer , and thus the value was lower.

Thanks in advance for any guidance.

Keep_pedalling

If the house has developement potencial that will be reflected in the estimated price, so IHT will need to be paid on the valuation as you are not selling but transferring ownership to yourself (I believe IHT needs to be paid within 6 months of the death) If you subsequently develope the property and sell later, then any profit you make will be subject to CGT unless you are planning to use it as your primary residence while doing it up.

slowpoke_rodriguez

Does it make any difference if I apply for planning permission while the house is still part of the estate, or should I transfer it to my ownership before taking any steps to increase it's value?

[Deleted User]

I don't know how things have changed, but when I inherited my fathers house in 1988 the solicitor sent an estate agent round to value it on the basis of normal selling price. He said it was worth £72,500, but knocked it down to £70,000 as it was for probate, not for sale. The District Valuer wasn't having any of it though, and put it back up to £72,500.

I got my own back a few years later, when I used that valuation and the IRVO statistics to get my council tax re-banded.

G6JNS

slowpoke_rodriguez wrote: »

Can someone please help clear up my confusion?

My father died before Christmas last year. I inherited his house which forms the majority of the estate.
As I understand , the valuation for Probate is based on it's valuation at the time of death, and must pay due regard to any development potential. It undoubtedly has potential as it is unmolested since the 1960s, has a reasonably sized garden and is the smallest house in the (desirable) street by some margin.

It was valued for probate purposes in January by five separate local estate agents, whose valuations varied by no more than 10% and all suggested it could be extended under permitted development by roughly 50%.
We took an average of these valuations and submitted this value for probate.
Probate has been granted though apparently the house value has not been agreed.
My (simplified) belief was that we submitted a value and either it was accepted or we argued about it with the taxman until it is decided. IHT is then due on this value once sold, or 10% per year. Any increase in value over this (currently rising at 10%+, apparently) is covered by Capital Gains Tax.
According to the solicitor handling the estate (executor in will) the value doesn't get decided until the property is sold. Is this so?

I am contemplating applying for planning permission, or Cert of Lawfulness to extend, and may even develop the house if feasible.

Firstly, when does the development potential cease to be 'at time of death', and recognise that the potential has been enhanced? At granting of Cert of lawfulness? Planning Permission? Actually building?

Secondly, how specific is 'At time of death'? Within a week, a month, 6 months?
It could be argued that as time of death was just before Christmas, potential purchasers were fewer , and thus the value was lower.

Thanks in advance for any guidance.

You really need to get some paid for professional advice as it seems the solicitor is not up to the job or it may be you have misunderstood him. There are all sorts of possibilities so you need to decide what is best for your circumstances. It is very unlikely you could extend the house by 50% without planning permission. Capital gains tax is payable on any gain if the property is sold unless you make it your primary residence. IHT is payable the estate including the house based on the value at the date of death. The value used for probate can subsequently be changed if it has been incorrectly calculated but does not depend on the house being sold.

Crabapple

What you haven't said is whether the Estate was liable to Inheritance Tax, or if you submitted form IHT205 or the longer form IHT400.

If it's a 400 then HMRC do look at the value submitted and will usually refer it to the District Valuer for agreement and at that point the value will be ascertained.

If it's a smaller Estate with no IHT consideration then no, the value won't be examined at this point (or is unlikely to be).

Are you planning to move into the house and live there, or just do it up, extend, and sell? If you live there the tax considerations are far fewer as you won't need to be concerned with CGT later. If you're merely thinking of selling then you should get some advice so you can minimise any tax in the future.

slowpoke_rodriguez

There is IHT to pay, and form IHT400 was used.

I do not own any other property and have lived in the property concerned for 5 years. I do not intend to live here for much longer.
I doubt I could afford to develop it, but by getting planning permission/certificate of lawfulness for an enlarged house hope to add to it's appeal.
To rephrase the original query, would such permissions add to the value at time of death (liable to CGT, if any), or merely confirm the existing development potential (IHT due)?

G6JNS

slowpoke_rodriguez wrote: »

There is IHT to pay, and form IHT400 was used.

I do not own any other property and have lived in the property concerned for 5 years. I do not intend to live here for much longer.
I doubt I could afford to develop it, but by getting planning permission/certificate of lawfulness for an enlarged house hope to add to it's appeal.
To rephrase the original query, would such permissions add to the value at time of death (liable to CGT, if any), or merely confirm the existing development potential (IHT due)?

Impossible to say how much it would add. Since IHT has been paid the District Valuer is likely to have confirmed the value and that would, I assume, include any development potential. The fact that there is potential to extend would normally just be included in the open market value. This might be different if there is potential to build an additional property on the site.

getmore4less

The value at DOD is the value, development potential would be included but it is things like planning and/or building that actually add the value anything else is just guess work valuers/district valuers can discuss.

Things you do to make the place more valuable do not change the value at DOD.

If you live there then there is no CGT to worry about.

Get the probate value as low as possible get it agreed/ascertained pay the IHT and move on adding what value you can.

getmore4less

According to the solicitor handling the estate (executor in will) the value doesn't get decided until the property is sold. Is this so

If the solicitor/executor is causing grieve consider telling them you are keeping it so get on and finalise the estate get the value/IHT agreed with HMRC, accenting the house to you.

slowpoke_rodriguez

"If the solicitor/executor is causing grieve consider telling them you are keeping it so get on and finalise the estate get the value/IHT agreed with HMRC, accenting the house to you."

This is probably the course to take.

Thanks!

It's interesting that you use the abbreviation DOD rather than TOD...