Getting a Valuation for Inheritance Tax

Danger_Mouse

Hi there,
My uncle has passed away and left his estate to me and my brother. I'm wondering what is the best way to go about getting his house valued for Inheritance tax purposes? should this be something I do asap, as would the tax we pay be based off the time the property was valued and not the time of death (e.g. if we got the house valued in 6 months and value has gone up, we pay more tax)?
Can we estimate the value based on other properties or is it best to get a few estate agents to give us a selling price estimate?

If anyone has experience and can advise, It would be much appreciated 

getmore4less

Is the estate into IHT?
Valuation for IHT is at DOD whenever you actually get it.

Depends on type of property what would be sensible to back up any value. 
If plenty of examples they may be sufficient to get a good valuation, backed up with EA valuations. 

If unusual or limited comparisons a paid pro valuation may be more appropriate 

Linton

HMRC dont care and if I remember correctly dont ask where the valuation comes from.  However if they dont believe the valuation they will challenge it.  So it should not be a number you dreamt up.

We initially used a couple of local EAs.  If the precise answer is imporrtant you should pay a RICS surveyor.  This would apply for example if the value of the house going to one beneficiary and another was getting the same amount in cash.  EAs should be free whereas a surveyor will charge.

I believe In theory the value should be that at time of death and  any increase when the house was sold may be taxable under CGT.  However there isnt usually enough time between death and sale and valuations arent precise anyway so the difference would not be significant significant.   However in our case the difference was significant and because of the timing we were able to set the probate value to the actual selling price.

Robert_McGeddon

What Linton said.

To give practical examples:

1 My Mum died a year or so ago. Total estate £50K under IHT threshold. Submitted probate with 2 estate agents' valuations. Probate granted quickly without issue.

2 Brother in law's Mum died 2 years ago. Estate well into IHT territory. House (and garden!) was very rundown so BiL agreed with 2 EAs to value it for probate application at £450K rather than the £500-525K similar sized properties in the area were selling for. Not accepted by HMRC.  Probate delayed, uncertainty over initial IHT instalment created and HMRC required a physical visit by the District Valuer - which took months to organise due to covid. When DV attended he agreed the £450K figure immediately.

Bobziz

Robert_McGeddon said:

What Linton said.

To give practical examples:

1 My Mum died a year or so ago. Total estate £50K under IHT threshold. Submitted probate with 2 estate agents' valuations. Probate granted quickly without issue.

2 Brother in law's Mum died 2 years ago. Estate well into IHT territory. House (and garden!) was very rundown so BiL agreed with 2 EAs to value it for probate application at £450K rather than the £500-525K similar sized properties in the area were selling for. Not accepted by HMRC.  Probate delayed, uncertainty over initial IHT instalment created and HMRC required a physical visit by the District Valuer - which took months to organise due to covid. When DV attended he agreed the £450K figure immediately.

In your second example, do you think HMRC would have accepted the valuation if it had been done by a RICS surveyor ?

theoretica

Will you be keeping or selling the house?  With my gran's house the estate agent's value was used for probate, but when it sold the inheritance tax was recalculated. 

Danger_Mouse

theoretica said:

Will you be keeping or selling the house?  With my gran's house the estate agent's value was used for probate, but when it sold the inheritance tax was recalculated. 

We're planning on selling it

Robert_McGeddon

Bobziz said:

In your second example, do you think HMRC would have accepted the valuation if it had been done by a RICS surveyor ?

Beyond my experience/expertise - sorry!  The point I was trying to make was that HMRC are getting more commercially aware and with limited resources they tend to go after the cases with substantial amounts of tax at stake and not bother with the trivial ones.  I suppose you could try to head off an enquiry by having your RICS surveyor (or indeed 2 EAs) supply valuations and explain any difference between that and the valuations/selling prices of nearby properties, e.g. cost of renovations etc. to bring the property to a comparable state to those nearby.

getmore4less

HMRC don't bother to ascertain value if there is no IHT and it looks reasonable.
How close is the estate to IHT. 

They have another go at the tax cherry when it is sold when a CGT assessment is needed. 

If selling immediately it will be obvious if an adjustment is needed. 

Danger_Mouse

getmore4less said:

HMRC don't bother to ascertain value if there is no IHT and it looks reasonable.
How close is the estate to IHT. 

They have another go at the tax cherry when it is sold when a CGT assessment is needed. 

If selling immediately it will be obvious if an adjustment is needed. 

Estate worth around £550k, maybe a bit more depending on house value

Mickey666

Can the estate benefit from a spouse's NRB?  If not then IHT will apply, as getmore4less has pointed out. 
Basically, if nowhere near IHT then HMRC won't really care about the valuation, but if IHT is payable (as may be the case here) then you'll have HMRC's full attention, both for the initial valuation and when the house is sold.

I'd pitch the initial valuation on the low side in order to minimise the up-front IHT payment and also because if the house sells for less than the valuation I'm not sure about the process for getting a refund on the IHT already paid.  This won't deprive the taxman as the amount will be recalculated when the property is actually sold, at which point everyone is working with a definitive figure.