Probate : wildly different RICS property valuations

wwl

I'm dealing with my late mother's estate - I'm executor & sole beneficiary. Father died 5 years ago & full unused allowance will be transferred.

I got an RICS surveyor to value the house. The value he gave was somewhat lower than I expected, and what a local estate agent estimated. The report states "valuation confidence : Amber - situations where there may be comparables but they are dated, or where valuation may not be sustainable"
Properties he compared it to in the report (on the basis of value per square metre) were of rather different types (terraced vs,. semi-det, smaller gardens etc.) there is a very wide range of different property types in the road.

The value he gave would put the estate about 70K under the IHT threshold.

I subsequently engaged another surveyor, who gave a value I think is about right, and puts the estate about £150K above the threshold. The report is much more detailed, and comparisons are to much more similar houses.

There are some structural and other issues, however both reports allowed a similar amount for this.

Do I have anything to lose by applying with IHT205 using the first surveyor's valuation?
Do HMRC often challenge RICS valuations?
How much time/hassle is it if they do challenge it?

Keep_pedalling

They will certainly pick it up if you are planning to sell the place and find yourself with £200k of capital gains to declare. Worst case situation is that you get hit for IHT plus a hefty fine for under valuing the estate.

wwl

How could I get hit with a finefor undervaluing if I've used the services of a qualified professional in good faith to get the valuation?

G6JNS

wwl wrote: »

How could I get hit with a finefor undervaluing if I've used the services of a qualified professional in good faith to get the valuation?

Valuation is not a precise thing. In my experience HMR&C will allow a difference of 10% without much argument. If they doubt the valuation then the will get the District Valuer to decide what the value is. I would ask a few estate agents to give you figures with a view to selling and see what they come up with.

Keep_pedalling

wwl wrote: »

How could I get hit with a finefor undervaluing if I've used the services of a qualified professional in good faith to get the valuation?

I did say worst case, but as you already know that the valuation is wrong and have had a second opinion you would need to be rather economical with the truth to get away with it.

Going on the numbers you have provided, you really should declare the correct valuation. The difference in paying 40% IHT on £150k and 28% CTG on £210k is hardly worth worrying about, so why take any risk in getting on the wrong side of HMRC?

wwl

Yes, thinking about it it's probably not worth the hassle. The second report has a lot of detail & photos about all the defects, which should be enough to show why the value is less than comparable properties.

Keep_pedalling

Just make sure you don't end up going the other way and over value it.

konark

If you are thinking of selling the house soon the first valuation is risky as HMRC would query the price rise. there would be no CGT to pay as long as you live there. If you don't CGT will be payable on the sale price minus the probate price so a low valuation could work against you.

If you intend not to sell then what is the risk of giving the lowert valuation? it's from a RICS member not just something you've made up yourself. Who is to say which valuation is the correct one? Worst case scenario HMRC will query it and send the District Surveyor rouns and if he values it higher you'll pay IHT, you can't get a 'fine' for undervaluing it because you didn't value it, you left that to a professinally qualified valuer., how were you to know he would be so wrong?

wwl

Keep_pedalling wrote: »

Just make sure you don't end up going the other way and over value it.

As I understand it, if sold within 2 years at a lower price, I can reclaim the IHT

charlie2015

this is what has happened to me . executors under valued house huge C,g .tax bill

jackyann

I would ask the Probate Office. Although unusual, this is not unknown, and their guidance will help you demonstrate your reasoning to HMRC.
Sometimes a local estate agent has a bit more of an idea about subtle issues in the area that can make a difference. This seems especially to apply to "mixed" roads, and where properties rarely change hands (this happened to us, in an area where the terraced houses had a high turnover, and the detached sold once in a generation, if that!)
However, I think I would also go back to the original valuer, explain your concern, and ask their opinion again.