Probate - a question re change of circumstance

woodyt

Hi there,
I sent off my probate application for my late father recently.
We had a couple of valuations for his house however since sending it off we have been advised that due to the large garden, there is potential to put another property on the land.
What happens if we decide to go down this route?
The estate agent has said we could add a potential £100k onto the house price ( was initially £265k) and would push us over the IHT.
Any advice would be greatly received.
Thanks

poseidon1

woodyt said:

Hi there,
I sent off my probate application for my late father recently.
We had a couple of valuations for his house however since sending it off we have been advised that due to the large garden, there is potential to put another property on the land.
What happens if we decide to go down this route?
The estate agent has said we could add a potential £100k onto the house price ( was initially £265k) and would push us over the IHT.
Any advice would be greatly received.
Thanks

A red book RICS surveyors  valuation would value the property as it stands for IHT purposes. The potential for development is merely that, since presumably your father never  actually attempted to get planning permission himself , which of course could have  been refused.

Assuming a red book valuation would  comes in at £265k, then you run with what you have already submitted.

Of course whilst waiting for probate nothing prevents you  from seeking planning permission ( I would be surprised if you could get the extra £100k without it) , in which case there would be capital gains tax to pay on the profit over probate value.

BooJewels

As @poseidon1 explained - the Government have it set up nicely, in that if you put a high valuation on a property, you might end up paying IHT on it.  But if you try and sneak a lower valuation to minimise the chance of IHT, but the asset then sells for more than valued, they sting you with CGT.  So it balances out in the long run.  It's the value at time of death that counts for Probate.

I made a slight error of judgement when I did Probate for my father's estate, in that we had a couple of valuations for the house that we felt were just too high, as the property was in poor condition, but in a great, sought after, location.  So I used the lower one - even though we were a long way inside IHT thresholds - just because it felt more realistic.  In the time it took to get Probate and then come out of Covid lockdowns, the house went on sale for even more than the higher valuation and sold on the first day for asking price.  So the estate ended up paying CGT on the difference - but in view of the extra we got for it anyway, it was worth it.

The buyer put it through planning permission and eventually secured it and the house will be around 4 times the size it was when we sold it (there's very little left of the original house) and the EA, who saw the plans, said it will be worth well over a million when it's done.  So you can only deal with the facts at the time, not what ifs.

Dandylion

This mentions ‘potential for development’ when valuing property (‘hope value’).

https://www.gov.uk/government/publications/hmrc-inheritance-tax-toolkit

22. Has the open market valuation at the relevant date(s) been obtained and used (for example, the date of death or date of gift) for each asset?

Risk

Valuation is an area of high risk for HMRC. This is particularly so where the valuation is not referred to a qualified, independent valuer. However, it is not sufficient to simply refer a valuation to a valuer. In the absence of proper instructions, the valuer will not understand the context nor have all the necessary details on which to make a proper valuation. Areas that are frequently overlooked include:

For land and buildings — the potential for the development of the land (in particular large gardens) and buildings (in particular dividing buildings into flats), the existence of tenancies