Capital Gains and other taxes manual

Section 10

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

Restraint and Confiscation Orders

10.1 Background

HMRC may require assistance from the VOA in connection with the recovery of proceeds of crime, usually under the Proceeds of Crime Act 2002 or Proceeds of Crime (Scotland) Act 1995. The request will normally be for a valuation report and be made by HMRC’s Criminal Investigation Directorate.

HMRC may need advice in connection with an application to the courts for either a Restraint Order or a Confiscation Order.

10.2 Restraint orders

The Court has the power to make a restraint order prohibiting a property being sold. This is made prior to a criminal hearing and can be made at any stage after a criminal investigation has commenced. ‘Where valuations are requested in Restraint Order cases it is important not to notify or inadvertently alert either the owner or occupier of the property to the ongoing proceedings.

HMRC may request assistance in both valuing and identifying a property. They will request a valuation report that can be used to inform and assist the court. Such requests are often made at short notice where urgent attention is required. The valuation itself is unlikely to be challenged at this stage and the valuer unlikely to be required to attend court.

###10.3 Confiscation orders

An application to Court for a confiscation order is made after conviction and can be some years later. The Court has the power to make an order for the defendant to pay a recoverable amount to HMRC. To assess this amount the Court needs to know the ‘market value’ of the assets held (usually at the current date). In practice the property may need to be sold to pay the amount but not necessarily so and the Court does not actually confiscate the property itself and pass on the proceeds of sale to HMRC. For this reason the level of valuation placed on the property is very important and it may be contentious, resulting in the valuer being asked to give evidence at a court hearing.

10.4 Constraints on inspections

In Restraint Order cases the valuation must be prepared largely from office records and no formal inspection or contact with the occupier should be attempted. If practical, the valuer should generally make a very discrete ‘drive-by’ inspection but no more than this so as not to alert the occupier to ‘official interest’ in the property.

In most Confiscation Order cases it is unlikely that there will be any cooperation to make an internal inspection so any inspection should be confined to one from the roadside, although there is no need for the level of discretion as in restraint order cases. In some instances where initial valuations are disputed, a full inspection and negotiated valuation may be requested.

Full use should be made of available desktop resources and office records to supplement the external inspection.

10.5 Procedure

Cases will normally be referred via the SVT Hub. If a request is received directly from HMRC a copy of the instructions should be sent to the SVT Hub for registration and allocation.

The case should be allocated to a valuer who is professionally qualified to give expert evidence, if this should be necessary. For registration purposes the case type is 195 and each individual property must be treated as a separate case even where multiple requests are received in respect of a single defendant.

HMRC may request an update to the valuation in an earlier report, in which case fresh investigations should be undertaken.

It is important to establish from HMRC whether the valuation is required for Restraint or Confiscation Order purposes and to establish the time-scale they are working to, including any court deadlines.

In Restraint Order cases, paper reports should be sent by the internal tracked mail service (TNT track and trace) whereas in Confiscation Order cases reports are less sensitive and internal non-tracked post is sufficient.

If the caseworker is informed that they are required to attend a court hearing, they should inform SVT Policy & Professional immediately. The caseworker may need to be prepared to give expert evidence orally in support and explanation of their valuation report.

10.6 Reports

As the VOA caseworker may be asked to attend a court hearing to support their valuation, care must be taken, both over the valuation and the wording of the report. It is important to be mindful of the uncertainties caused by lack of full inspection and to make assumptions that are reasonable.

It has been agreed with HMRC that the form of report should be that of a side headed report on normal VOA headed paper. The report should clearly express the factual information available and assumptions made. It should be sufficiently detailed and explanatory to identify and describe the property and any relevant comparable evidence should be included. The report should have a validity clause and sufficient caveats to reflect the limitations caused by lack of full inspection and make clear any assumptions made as to the interest, tenure, physical condition, level of modernisation etc. An example of a previous report can be obtained from your sector leader and should normally be followed as a guide in both restraint and confiscation cases.

The report is not intended as a formal witness statement due to the limitations caused by lack of full inspection. It is also anticipated that relatively few cases will be contested and require court attendance.

In view of the potentially contentious nature of these valuations, a draft report should be emailed to your sector leader for approval before it is reported to HMRC, although this should not be allowed to delay meeting any HMRC deadlines imposed by court.

When addressing the report to HMRC’s Criminal Investigation use their PO Box number rather than their full postal address. The report may be disclosed in court or copied to the defendant and it is important to avoid inadvertently bringing CI’s full postal address into the public domain. Reports may be sent by secure ‘gsi’ email but when required to post to a PO Box number use Royal Mail.

Unusually, HMRC may request a full expert witness statement if the value of the property is especially contentious, the parties allow a full inspection and provided sufficient time is available for its preparation. In this circumstance SVT Policy & Professional must be fully involved and will give the valuer guidance in the preparation of a detailed expert witness report and exhibits.