Capital Gains and other taxes manual

Appendix 39: appearance before the General and Special Commissioners - proof of evidence

The Valuation Office Agency's (VOA) technical manual used to assess Capital Gains and other taxes.

1. General

The following outline Proof of Evidence has been prepared for the guidance of valuers appearing before the General and Special Commissioners as expert witnesses, particularly in Private Residence Relief appeals, although it may be suitably adapted for use in other cases where an opinion is required as opposed to evidence of fact. It is not exhaustive, being designed to cover the majority of cases, and may therefore require detailed variation in accordance with local conditions. In a substantial number of cases it will be prudent to start at 3(c) below as it is easier to prepare a “Proof” with the “Agreed Facts” to hand.

2. Format

The Proof should be typed on A4 paper, (unless otherwise required by the advocate) with double spacing and margins designed to allow inclusion of later manuscript notes.

3. Other matters

a. Plans should show a North point, scale, appropriate “Crown Copyright” reservation and DV’s reference number. Each will bear a full heading and if designed to show both parties’ comparables these should be clearly identified by colour-coding.

b. Schedules should include item numbering and column lettering for ease of reference, together with an appropriate provision for remarks. They must be clearly identified to separate those produced by the witness from those of the taxpayer.

c. Statement of Agreed Facts. This is of considerable importance in saving time and simplifying the Hearing so that it would be prudent for the valuer to seek early consultation with the advocate, in order that a draft may be prepared and submitted to the taxpayer. The draft may include matters relating both to the property and to the technical aspects of the case required by the advocate and the expert witness should take care to include only those items which can be spoken to from the witness’s own knowledge. In an IR Solicitor case the advocate will normally finalise agreement with the taxpayer, but where the Inspector is to appear as advocate, either the advocate or the DV may deal with this, as arranged between them.

d. Jargon. Care should be taken to avoid such items as EFA, RCA, PRR etc, and if used, should be accompanied by a brief explanation. It must be remembered that the Commissioners need have no valuation background or experience and the majority of valuation terms and concepts should be carefully explained.

4. Evidence

Care should always be taken to avoid hearsay or hindsight evidence, which may be open to challenge at the hearing or form the basis of a later appeal to the High Court, even in proceedings before the General Commissioners which are often more informal than those before the Special Commissioners or the Lands Tribunal. Matters arising by way of hindsight may be admissible in a secondary role when merely used to confirm a trend or position already adduced in primary evidence.

5. Role of the valuer

This will be solely that of an expert witness giving a professional opinion supported by such evidence as may be available. The valuer must conform to this role and will bear in mind that all matters of advocacy will be dealt with by the Inspector of Taxes or the Solicitor with whom close liaison at all stages will be essential. The valuer will, however, remember that the valuer’s function is also to assist the Commissioners to arrive at a correct decision by a clear and concise deployment of the evidence.

(The following specimen layout is written as for a Section 222 TCGA 1992 case)

Proof of Evidence

Hearing Before the General (or Special) Commissioners

In Connection With


Taxpayer - (Name)

(Witness - Full Name) will say:

1) Appointment and Qualifications:

Recital of appointment qualifications and professional experience.

[Note: If the witness was not serving in that particular office at the relevant date (ie the date of contract), it should be stated where the witness was serving. If the circumstances are such that either the witness was in post in an office much further away or then unqualified, this can be covered by explanation, for example, that the witness has general experience in dealing with landed property of all types. If the witness was in an area close to or if the witness has personal connections with the relevant location then it can usefully be stated. It is far more satisfactory that any possible deficiencies in the witness’ standing are brought into the open in evidence rather than revealed by cross-examination.

Witnesses should refrain from referring to themselves or their opinion as “expert”, or similar description, as the standing of an expert in such matters has been questioned by the Commissioners.]

2) Schedule of Exhibits:

Produce the following documents:- (as required in a s.222 case)

DV1 General plan showing the area and identifying the location of the property.

DV2 Plan showing the property prior to the sale of part of the grounds.

DV3 Plan showing the property after sale of the grounds.

DV4 Plan showing the property with the boundaries of land considered to be required for its reasonable enjoyment as a residence clearly identified.

DV5 Description of the accommodation in the subject property.

DV6 Floor plans of subject property.

DV7 Schedule of comparable properties.

DV8 Plan showing location of comparable properties.

DV9 Floor plans of comparable properties (if appropriate).

[Note: The form and content of exhibits will depend on the individual case but these are considered to be the number normally required. The numbering of Exhibits should be adjusted where some of those listed are not required.

Every effort should be made prior to the hearing to agree as many of these documents as possible].

3) Situation:

3.1 General description and history of locality. Refer to DV1.

3.2 Specific description of immediate locality of subject property including general details of nearby properties, and comment as to whether the subject property is typical or otherwise.

[Note: The witness should endeavour to agree as many of the details relating to situation and the property as possible, particularly the latter, in order to avoid the danger of a taxpayer correcting the witness during the hearing and weakening credibility].

3.3 Specific comment, if necessary, on any nearby development (including that proposed or completed at the relevant date on the land sold off) which may point to a change in character. Care must be taken to avoid hindsight.

4) The Property:

From inspections, records, taxpayers’ information, photographs etc, a description of the house and the site prior to the sale viz:

a) House generally - construction, condition, quality, services etc. Refer to DV5 and DV6. b) Accommodation. c) Outbuildings and ancillaries. d) Site - as originally constituted with details of outlook, access, terraces, formal gardens, tree and hedge screens etc. Total acreage. 5) History of Case:

5.1 Recital of facts as to the original ownership and relevant sale, with dates and areas. Refer to DV2.

5.2 Facts as to the situation after the sale. Details of any development of the land sold. Refer to DV3.

5.3 Details of request from instructing Department with full recital of appropriate Section of the Act - for example s.222 TCGA 1992 subsections (1) to (4). Indication of the relevant date.

[Note: In CGT cases, whether the matter falls within s.222 TCGA 1992 or s.101 CGTA 1979 is determined by which Act was in force at the date of disposal and all references should be adjusted accordingly].

5.4 Details of inspections and resulting preliminary conclusions as to land required. Refer to DV4.

[Note: It is considered essential that the witness re-inspects the property shortly before the Hearing particularly if there has been some lapse of time since the last visit, in order to counter charges of error of memory. If the property or part thereof has been demolished and the witness was unable to inspect, it must be so stated.

Where the witness is of the opinion that part of the area sold did not constitute garden or grounds at the relevant date, the witness should say so and give reasons. The circumstances to be considered are those “as at” the date of disposal in the then current market conditions. (See Varty HMIT v Lynes - 242 EG 625.]

**6) Application of the Selection: **

6.1 Here the witnesses should explain their understanding of what has to be done having regard to the statutory provisions and case law and how the witness proposes to do it.

[Note: The manner in which the statutory provisions, meaning of the word “required” and the objective nature of the test of requirement are dealt with must be resolved prior to the hearing between the witness and whoever is conducting the case for the Revenue. It is for the Board’s Solicitor, if involved, or the Inspector to cover these in depth enabling the witness to refer briefly to them to demonstrate to the Commissioners that the advocate has correctly applied the relevant criteria].

6.2 The ‘Relevant Date’ is the date of unconditional contract or the date when a conditional contract is satisfied.

6.3 Witness should indicate the area which is accepted to be garden or grounds and if this is disputed indicate the Revenue view.

6.4 Witness should refer to the fact that bearing in mind the requirements of the Statute the witness has had regard to the size and character of the property in reaching a conclusion.

7) Comments on Taxpayers Case:

Rebut taxpayer’s arguments as to other - or alternative - areas or locations. Contrast: those with the criteria outlined in para 6 above.

8) Size of permitted Area:

8.1 Acceptance that the house qualifies as the only main residence in terms of the Relevant Act. The primary issue is to determine what area of garden or grounds is required for the reasonable enjoyment of the residence as a dwelling house.

8.2 Reiterate that in the opinion of witness the area shown on DV4 was that required for reasonable enjoyment at the time of sale.

8.3 Emphasise wording of the appropriate Section - test of requirement - reasonable enjoyment (of the dwelling house) as a residence, not the area desired by a particular individual owner - an objective test in the light of the Section. To distinguish between what is “required” and what is merely desirable. To look for the requirement of the type of person who would normally reside in a property of this size and character.

8.4 Approach to the problem, scrutiny of comparable dwellings in the locality - general background and history - changing patterns - regard to the expressed views of the taxpayer.

8.5 Trend towards smaller plots. Cost and effort in keeping up large gardens; time and availability of professional assistance.

9) Most Suitable Location for the Permitted Area:

9.1 Consider the most suitable location for the permitted area. Boundaries actually retained not necessarily of assistance as dictated by other considerations (development layout etc) rather than reasonable enjoyment.

9.2 Detailed explanation of area chosen with reference to DV4 (and DV9). Natural boundaries considered where appropriate - views from house - position of included ancillaries etc.

[Note: The wording of the following paragraphs is of special assistance where the permitted area is slightly in excess of the statutory half hectare or, for example, as a justifiable reason for a subsequent offer to settle at something over half a hectare.

“My initial reaction after carrying out a detailed inspection of the subject property and listening to the taxpayer’s representations was that a house of this size and character situated in this locality would certainly not require more than half a hectare of garden or grounds for its reasonable enjoyment as evidenced by the comparable properties to which I have referred.

But when considering the application of my preliminary conclusion that (the Property) would not require more than half a hectare for its reasonable enjoyment, I found it difficult to draw the boundaries of an exempt acre in a manner which would produce an entirely satisfactory result”.]

10) Comparables:

Deal with each comparison in detail drawing appropriate conclusions. Reasons for choosing (or rejecting) comparables as necessary. Refer to DV7 and DV8.

[Note: The comparables must show the situation that existed at the relevant date. They should not be too selective ie only show gardens of under half a hectare if in fact comparables with larger gardens exist, but it will then be necessary to explain that these are occupied with garden or grounds in excess of half a hectare due to historical circumstances rather than what is required. Witnesses may need to deal with situations where houses still have large plots due to lack of development potential or other demand for the excess land.

It may be necessary to include a reference to properties that prima facie seem to indicate a different permitted area and either clearly explain why they are not comparable or argue the historical circumstances referred to above.

If the DV becomes aware that the other parties intend to refer to the DV’s treatment of a previous case, refer to cases dealt with directly by the Inspector without reference to the DV/CV(S) or refer to previous Commissioners decisions the DV should submit the matter, with full details where possible, to CEO via the RD for liaison with CAV6 (CGT).

If confronted with such cases at the Hearing, the witness will remember that Commissioners’ decisions are not decisions of record, especially to other bodies of Commissioners (ie they are similar to Valuation Tribunal decisions in this respect).

Whilst comparables which show a sale of part of the garden for development prior to the relevant date, and to a lesser extent just after the relevant date so as to demonstrate the continuing trend, are most useful, those involving either demolition of the property and total development or conversion, for example, of a large house to flats are not; they are no longer similar in size or character. A house rebuilt or converted into flats is no longer one residence. Where the comparables show a permitted area of less than half a hectare the witness should say so before conceding the statutory half a hectare.]

11) Summary:

Brief closing summary repeating opinion of area and location of land required for the reasonable enjoyment of the dwelling-house as a residence at the time of the disposal.