valuing property for probate

christian35

hello all.

My father passed away in july leaving me and my sister as joint executors.
there are x4 properties and i have been given the task of valuing them.
the solicitor said x2 per property however ive tried to achieve three as alot of people have said this is the norm.
i have received many of the valuations back by email so im printing of to create a small folder.

one of the propertys was owned by my fathers company which is currently being restored as it did not pay its tax for sometime whilst he was ill. this was the only asset of the company and i beleive me and my sister will become MD and Secreatary.

my questions:

1, how should the valuations apear from estate agent? one agent went to the trouble of naming it as my fathers estate and ensuring it was addressed to me and my sister.
not sure if neccessary on all?

2, will the value for iht calculation be an average of all three valuations per property?

3, will the property owned by my fathers company be exempt from iht as my sister suggests.

thanks for any help and taking the time to read this

christian

Keep_pedalling

You could use the average value of all three, the middle value, or even the highest value and if need be claim any back any tax paid if that turns out to be an over estimate. For estates where IHT is due or the value is near the threshold they is a strong chance HMRC may challenge the valuation, which is why they recomend you get aa accurate valuation (at date of death) from a professional values rather than use estate agents.

I am a bit confused about the business, because if the property is the only asset then it is not really a business which would have other assets such as money in the bank, stock, a healthy order book etc. I know that if you sold that one asset then it becomes liable for IHT, but do you really want to be the MD of unviable business?

christian35

Hi thanks for reply.
The three property's owned in my fathers and previously my mothers name are worth approximately 1.1m.
The property owned by the company is approx 600k I was interested in only paying a fair legal minimum of iht. I have had the property's valued in a 'worst case scenario as they all need some work. Perhaps the solicitor is just trying to get an idea of estate. Is it the certain case that surveyors/rics valuation must be carried out or do people get away using ordinary estate agents

G6JNS

christian35 wrote: »

Hi thanks for reply.
The three property's owned in my fathers and previously my mothers name are worth approximately 1.1m.
The property owned by the company is approx 600k I was interested in only paying a fair legal minimum of iht. I have had the property's valued in a 'worst case scenario as they all need some work. Perhaps the solicitor is just trying to get an idea of estate. Is it the certain case that surveyors/rics valuation must be carried out or do people get away using ordinary estate agents

With an estate of that size HMR&C are likely to get the values checked by the District Valuer. You really should get the valuation done by a Chartered Surveyor. Otherwise you run the risk of HMR&C querying it and even penalties.

troubleinparadise

G6JNS wrote: »

With an estate of that size HMR&C are likely to get the values checked by the District Valuer. You really should get the valuation done by a Chartered Surveyor. Otherwise you run the risk of HMR&C querying it and even penalties.

The cost of a qualified surveyor's valuation will be peanuts in comparison to values of £1m plus, and reduce any potential inheritance by a few hundred pounds.

HMRC referred the valuation I had done to the DV, and that was by a qualified surveyor as the property was in a mixed area. And somewhat less value than the OP states - but the estate was into IHT levels.

So don't try to "get away" with trying to outwit HMRC - they're there to spot discrepancies, and have seen it all before.

Keep_pedalling

You also need to take professional advice on the company. You have provided little detail but at the time of your father's death it looks like the company was dormant as you say it is now being restored, and you cannot claim business relief on the assets of a dormant company.

MichelleUK

You mentioned that the company is currently being restored and that it related to unpaid taxes? It is very unclear, but do you mean that HMRC applied to have the company struck off as it did not pay its taxes?

If a company is struck-off, any remaining assets of the company then belong to the Crown. So, it may be that, at the date of your fathers death, the company that your father held 100% of shares (again, an assumption) had no value but he did hold the right to apply for restoration of the company.

One thing is for certain, you do not include the value of the house owned by the company on IHT400 as held in a property. The company is a totally separate legal entity to your father - he owned the shares and not the house.

CAVEAT: Although I am an accountant, this is real specialist tax expert stuff beyond my knowledge- so what follows is my best guess at what may happen. Ensure that your solicitor consults a experienced tax/insolvency expert!!!

It appears that there are two likely possibilities - either way you will pay tax, be it IHT or CGT.

1. The value of the company shares are considered 0 for IHT400 as it was struck off at the time off death. The company is then restored, then has value again and when the company is wound up (which I assume you would want to do to) CGT would be due on the difference between the value of the shares at death and the sum achieved.
2.There may be some complex way to value the shares at the date of death that will need to be stated on the IHT400 as shares owned. CGT will be payable on the difference between the values at the time of winding-up (or whatever method you use to extract the funds from the company) and probate value.

christian35

Hi and thanks all for replies

The company was actually struck off before my fathers death and myself and my sister apointed solicitor to restore under his instruction this is still ongoing.

The property owned by the company was in long term lease to a funeral director who hasn't paid rent for some time I suspect since they found out about company's problems.

I called them shortly after my fathers death and they were already aware of the company's status and advised my father no longer owned property, they were not happy to communicate and very unfriendly. I am also interested to find out if they are within there rights to stop payments or weather I could use this to get them out so that property can be sold or re developed.

um not sure on my next steps when company is finally restored. Our solicitor dealing with probate has said she may send letter to request outstanding rent arrears to probate account but I'm not sure if this is correct procedure.

Thanks for reading

MichelleUK

christian35 wrote: »

Our solicitor dealing with probate has said she may send letter to request outstanding rent arrears to probate account but I'm not sure if this is correct procedure.

Once the company is restored, and if the house is still owned by the company, any rent will belong to the company and not your fathers estate. Even though your father owns the company 100% the solicitor can not just take amounts from it and add it to estate funds. There are very specific rules and means about how to remove funds from a company.

Is it possible that you may have misunderstood what the solicitor said? If not, I would be very concerned about their advice and ask them if they are taking advice from an tax expert who is familiar with company restorations?

I am shocked that they do not appear understand that the company is a separate legal entity to your father and that it is not possible to just mix up the assets as they see fit!

G6JNS

christian35 wrote: »

Hi and thanks all for replies

The company was actually struck off before my fathers death and myself and my sister apointed solicitor to restore under his instruction this is still ongoing.

The property owned by the company was in long term lease to a funeral director who hasn't paid rent for some time I suspect since they found out about company's problems.

I called them shortly after my fathers death and they were already aware of the company's status and advised my father no longer owned property, they were not happy to communicate and very unfriendly. I am also interested to find out if they are within there rights to stop payments or weather I could use this to get them out so that property can be sold or re developed.

um not sure on my next steps when company is finally restored. Our solicitor dealing with probate has said she may send letter to request outstanding rent arrears to probate account but I'm not sure if this is correct procedure.

Thanks for reading

ANy rent is due to the company not your late father's estate. If the solicitor does not know that they should be struck off! It suggest toi me that the solicitor is out of their depth. You need a company law specialist to help you.

christian35

Yes I'm not 100% sure of her intentions but she was certainly interested in there rent arrears.

From all of this in assuming I will need another solicitor to request outstanding arrears unless I try myself?

Probate solicitor was recommended by and from same company as insolvency solicitor.