The Valuation Office Agency's (VOA) technical manual used to assess capital gains and other taxes.
Part 1: the legislation
Most residential properties are owned directly by individuals but in some cases a dwelling may be owned by a company (or other collective investment vehicle). In these circumstances the dwelling is said to be ‘enveloped’ because the ownership sits within a corporate ‘wrapper’ or ‘envelope’.
ATED is a tax payable by ‘non natural persons’ (i.e. certain companies, partnerships and collective investment vehicles) that own an interest in a dwelling valued above a certain amount. It was introduced by the Finance Act 2013 (FA 2013) and first came into effect on 1 April 2013. The tax was extended to include additional properties from 1 April 2015 and 1 April 2016 by the Finance Act 2014.
12.2 ATED Tax Returns
ATED is payable each year and taxpayers need to complete an ATED Tax Return for each if all of the following apply:
- The property is a dwelling (see paragraph 12.4 below).
- The property is situated in the UK.
- The value of the property on 1 April 2012, or at the date of acquisition if later (see paragraph 12.5 below), is above the threshold value for the tax. The original threshold value of £2 million was reduced to £1 million from 1 April 2015 and £500,000 from 1 April 2016, by the Finance Act 2014.
- The property is owned, completely or partly, by a company, a partnership where one of the partners is a company or a ‘collective investment vehicle’ (for example, a unit trust or an open ended investment company).
There are reliefs that could in some cases reduce the tax completely but taxpayers can only claim these reliefs if they complete and send in an ATED tax return.
ATED tax returns and payments normally have to be submitted to HMRC by 30 April at the beginning of each ATED period. An ATED period lasts for one year and begins on 1 April. For the first year of ATED (i.e. for the period beginning 1 April 2013) the tax return was not due until 1 October 2013 and payment was not due until 31 October 2013. Similarly for the first year of the reduced value thresholds introduced by the Finance Act 2014 (i.e. for the period beginning 1 April 2015) the tax return is not due until 1 October 2015 and payment is not due until 31 October 2015.
If a dwelling first falls within ATED on a date after 1 April in an ATED period, then the return and payment are due within 30 days where purchased or 90 days where the dwelling is newly built. For example, if a taxpayer purchased a property on 1 July, their return and payment would normally be due on 31 July.
12.3 Amount Payable – value bands
The amount of ATED payable depends on the band into which the value of the property falls. The rates currently proposed are:
|Property Value||Annual Tax 2015-16||Annual Tax 2016-17|
|>£500,000 to £1 million||Not applicable||£3,500|
|> £1 million to £2 million||£7,000||£7,000 + CPI increase|
|>£2 million to £5 million||£23,350||£23,350 + CPI increase|
|>£5 million to £10 million||£54,450||£54,450 + CPI increase|
|>£10 million to £20 million||£109,050||£109,050 + CPI increase|
|>£20 million||£218,200||£218,200 + CPI increase|
If a taxpayer only owns the dwelling for part of a year, or they change how they use the property so that it moves into or out of ATED during the year, then ATED applies on a proportionate basis.
The amount of ATED payable is normally increased each year in line with increases in the Consumer Price Index (CPI).
12.4 Basis of valuation
The value of a dwelling for the purposes of ATED is the ‘market value’ of the property on the relevant day and s.98(8) FA 2013 provides that ‘market value’ is to be determined as for the purposes of the TCGA 1992 (see sections 272 of that Act). Guidance on the meaning of ‘market value’ for the purposes of the TCGA 1992 is contained in Section 7, paragraph 7.1 of this Manual.
If it is necessary to value only part of a property (for example, if part of the property owned by the company is used for commercial purposes) then only the residential part of the property should be valued for the purposes of ATED. Any necessary preliminary arrangements to enable a sale of the dwelling part only should be assumed to have been made before the hypothetical sale, in accordance with established case law.
12.5 The valuation date
The valuation date for ATED depends on whether the interest in the property was owned by the taxpayer on 1 April 2012 or whether it was acquired or built after that date.
a. If the interest in the property was owned on 1 April 2012 then the valuation date is 1 April 2012.
b. If the interest in the property is acquired after 1 April 2012 then the valuation date is the date of completion of the purchase or, if earlier, substantial performance of the contract.
c. If the property is built after 1 April 2012 then the valuation date is the date when the property is first occupied, or the ‘completion day’ whichever is the earliest. The ‘completion day’ is the day on which the new dwelling is treated as having come into existence for the purposes of Council Tax.
The value of the property on the date specified under (a), (b) or (c) above will be used for ATED return periods from 1 April 2013 up to 31 March 2018. It will be necessary for all properties to be revalued again as at 1 April 2017, to cover the ATED returns for the five return periods starting on 1 April 2018.
12.6 The Property to be valued
ATED applies to ‘dwellings’ as defined in s.112-119 FA 2013 and it is important that caseworkers understand the extent of the property to be valued. In particular:
The property to be valued will include all land that is, or is intended to be, occupied or enjoyed with the dwelling as ‘garden or grounds’ (including any buildings or structures on the land unless they are being used for a purpose covered by a relief). ‘Garden and grounds’ are not defined in the statute other than being land that is occupied and enjoyed by the taxpayer with the dwelling. Garden or grounds will normally include any land serving chiefly for ornament and recreation but not land used for agriculture, commercial woodland, trade or business. Paddocks and orchards may constitute ‘grounds’, provided that there is no business use.
b. dwellings forming part of a larger mixed use property
If a dwelling forms part of a larger mixed-use property that has parts not used for residential purposes then only the residential part should be valued.
c. other dwellings
If the property owned by the taxpayer (including any property owned by a company or person connected with the taxpayer) comprises of more than one dwelling or the taxpayer owns other adjoining dwellings then the property to be valued may include other associated dwellings. Associated dwellings should be included in the valuation if:
i) The associated dwelling is situated in the garden or grounds of a dwelling and occupied or enjoyed with that dwelling. (s.115 FA 2013)
ii) The associated dwelling is situated in the garden or grounds of the main dwelling and, although not occupied or enjoyed with that dwelling, it does not have ‘separate access’ (see paragraph 12.7 below) and is not being used for a purpose covered by a relief (see paragraph 12.12 below). (s.116 FA 2013)
iii) The associated dwelling is in the same ‘building’ (see paragraph 12.8 below), there is ‘private access’ (see paragraph 12.9 below) between the two dwellings and it is not being used for a purpose covered by a relief (see paragraph 12.12 below). (s. 117 FA 2013)
12.7 Other Dwellings – Meaning of Separate Access (s.116(9) FA 2013)
For the purposes of paragraph 12.6(c) (ii) above, an associated dwelling has ‘separate access’ only if:-
a. There is access to the associated dwelling directly from a highway (in Scotland, a road) that the dwelling adjoins, or
b. The person entitled to possession of the associated dwelling has access to that dwelling from a highway (in Scotland, a road), exclusively by passing over land that the person is entitled to pass over by reason of one or more rights of way or other interests in land to which the person is separately entitled.
12.8 Other dwellings – meaning of a building (s. 119 FA 2013)
For the purposes of paragraph 12.6(c) (iii) above, any structure (such as a terrace of houses or a pair of semi-detached houses) that is composed of or includes dwellings is regarded as ‘a building’.
12.9 Other dwellings – meaning of private access (s.118(2) and (3) FA 2013)
For the purposes of paragraph 12.6(c) (iii) above, there is ‘private access’ between two dwellings if the person entitled to possession of each dwelling is entitled, by reason of a right of way or other interest in land, to have access to that person’s dwelling from the other dwelling, without passing over any part of the building (or any other land) in which a ‘third party’ has an interest entitling that third party to enter it.
A ‘third party’ means a person other than the persons entitled to possession of the dwellings in question and persons connected with any of them.
12.10 The interest to be valued
The interest to be valued is the actual interest held by the taxpayer at the valuation date.
Where companies or individuals connected to the taxpayer own other interests in a dwelling, then these should be added together for valuation purposes, i.e. the two interests should be valued as though they were a single aggregated interest based on what a purchaser would be prepared to pay to acquire both interests together (s.109 FA 2013).
If, for example, the taxpaying company owned the freehold interest in a dwelling subject to a lease to an individual connected to the company, it would be appropriate to value the combined interests on the assumption that both were available to any prospective purchaser.
ATED does not apply to buildings used for the purposes specified in s.116(2) or (3) FA 2003. This includes, for example, hotels, guest houses, boarding school accommodation, hospitals, student halls of residence, military accommodation, care homes and prisons.
12.12 Exemptions and reliefs
There are a number of reliefs that may mean that a taxpayer does not have to pay any ATED but they can only claim these reliefs by completing and sending in an ATED return.
A dwelling might get relief from ATED if it is:
a. let to a third party on a commercial basis and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner.
b. open to the public for at least 28 days per annum.
c. held for the use of employees of the company, for the company’s commercial business and where the employee does not have an interest (directly or indirectly) in the company of more than 5 per cent. The employee’s duties must not include services for any present or future occupation of the property by someone connected with the company.
d. a farmhouse, if it is occupied by the farmer who farms the associated farmland full time.
e. part of a property trading business and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner.
f. part of a commercial property development business, purchased with the intention to re-develop and sell it on and is not at any time occupied by anyone connected with the owner.
g. financial institutions acquiring dwellings in the course of lending.
h. providers of social housing.
Full details of the above reliefs can be found in Section 30 of HMRC’s ATED Technical Guidance.
a. are exempt from ATED (see Section 42 of HMRC’s ATED Technical Guidance).
Part 2 – Case procedures - general
12.20 Reference of cases to the VOA
HMRC may request advice for the purposes of either:
a. a taxpayer’s request for a ‘Pre-Return Banding Check’ (PRBC) or b. a post-return assurance check case.
HMRC will send all requests for advice by e-mail to ‘SVT Hub’. The e-mail heading and text will make it clear whether the request is for the purposes of (a) or (b) above. The e-mail will also include the relevant HMRC client account number.
The e-mail will include a scanned copy of either the PRBC application form or the ATED tax return form and any attachments.
12.21 Registration of cases
Taxpayers are required to submit a separate ATED tax return for each property in which they have an interest and which is liable to ATED (i.e. not covered by a claim for relief or exempt). Similarly if a taxpayer requests a PRBC, before submitting their ATED tax return, they must fill in a separate PRBC application form for each property in which they have an interest. A separate case should therefore be created for each valuation included in the request from HMRC. For example if a taxpayer submits two PRBC applications in respect of two different properties then, even if they are referred to the VOA in one e-mail by HMRC, two separate cases should be created.
All ATED cases should be entered on the CRAC system using the following case types:
a. PRBC cases = case type 140. b. Post-return assurance check cases = case type 141.
All cases should initially be registered on CRAC as credit type 01 (valuation only cases). Some cases falling within (b) above may need to be amended to credit type 02 (negotiation cases) at a later date during the life of the case. If a case is reported then later referred back for further negotiations it should be registered as credit type 03 (referred back cases).
All ATED cases should be entered on the EDRM system and processed in accordance with EDRM guidance. On registration the following documents will be placed on every file:
a. the HMRC instruction with attachments.
b. a valuation template.
c. a case reporting template
d. a History Working Sheet
e. a digital map.
The case will be allocated to the appropriate caseworker indicated on the ATED case allocation sheet.
All requests for valuation advice should be acknowledged by SVT Hub when the case is allocated to a caseworker. The acknowledgement should include the name of the caseworker, their location, and telephone number.
12.23 Time Limits
ATED cases are subject to the same timeliness performance targets as CGT cases so:
a. for all credit type 01 cases the target is to report cases within an average of 20 working days.
b. for all credit type 02 or 03 cases the target is to report all cases as soon as possible and within an average of 100 working days.
12.24 Liaison with HMRC
Caseworkers should maintain regular contact with the HMRC caseworker during the life of a case, particularly if any difficulties are encountered in progressing the case. If there are delays in progressing a case progress reports should be issued to HMRC in accordance with the guidance below.
All reports to HMRC should be sent to the HMRC caseworker by gsi e-mail, unless the case is ‘confidential’ (see paragraph 12.28 below).
When reporting ATED cases all that will be accepted or agreed and reported is the relevant value band, not the precise value. Consequently the values recorded in CRAC should not be a precise value. For ATED cases the following codes should be used both for the ‘value reported’ and the ‘value returned’ fields in CRAC:
|Value Reported||Value Returned|
|Valuation cannot be provided||0||Not applicable - use codes below|
|Sub threshold < £500K||1||1|
|> £500K - £1M||3||3|
|> £1M - £2M||4||4|
|> £2M - £5M||2||2|
12.26 Quality assurance and quality control
ATED cases are subject to the QA and QC procedures applicable to all HMRC casework.
12.27 Advice on questions of principle and law
If, at any stage in a case, caseworkers need advice on questions of principle or legal interpretation they should consult the SVT Policy and Professional team.
12.28 Confidential cases
If, exceptionally, HMRC consider that a case should be treated as ‘confidential’ the hardcopy papers will be sent by TNT Tracked Service to the VOA SVT Operations Manager, who will then arrange for registration and forward the hardcopy papers to the caseworker. Casework marked as ‘confidential’ should be worked and retained in hardcopy with a suitable note placed into the EDRM file stating where the hardcopy file is located. The hardcopy file should be clearly marked up on the front cover as ‘confidential’. No papers should be held on any other computer drives.
Part 3 – Case procedures – PRBC cases
The purpose of the PRBC service is, if possible, to give taxpayers who may be unsure about their proposed valuation some certainty before they submit their ATED tax return.
Taxpayers might want some certainty where a property is valued at an amount close to one of the ATED value band thresholds. This is so they can agree which ATED band the property falls into, or whether it falls outside the tax as it is deemed to be under the value threshold. The PRBC service is only available to customers if:
- they are not due a relief that will reduce the ATED charge to nil, and
- the value the taxpayer has placed on the property falls within 10 per cent of a banding threshold
A taxpayer may therefore only request a PRBC if their valuation of the property is between the ranges shown below:
- £450K - £550K
- £900K - £1.1 million
- £1.8 million - £2.2 million
- £4.5 million - £5.5 million
- £9 million - £11 million
- £18 million - £22 million
The aim of the PRBC service is to confirm, based on the information provided, whether the banding proposed by the taxpayer is acceptable (rather than the specific valuation of the property).
All PRBC requests must be sent by the taxpayer to HMRC. If HMRC consider that a PRBC is appropriate they will then request advice from the VOA.
12.31 HMRC request
If based on the information provided in HMRC’s request for advice; a. there is insufficient information to identify the property, or b. it is clear that the taxpayer’s valuation of the property does not fall within the ranges specified in paragraph 12.30 above,
HMRC should be advised as soon as possible and no further action should be taken on the
request until further information or clarification is received from HMRC. If a case has been opened and (b) above applies the case should be cancelled as soon as possible.
If advice is still required, HMRC will resubmit the request with all the papers attached to the SVT Newcastle inbox. If the further information or clarification is received by a caseworker direct from HMRC the caseworker should forward the e-mail to the SVT Newcastle inbox.
On receipt of the further information or clarification from HMRC SVT Newcastle will register a new case (credit type 01).
12.32 Further information required
On receipt of a PRBC case, the caseworker should as soon as possible consider whether there is sufficient information available to provide advice on the relevant valuation band or whether further essential information is required. The caseworker should consider the information provided by the taxpayer and office records.
Where information is lacking the caseworker should, whenever possible, make any assumptions that seem reasonable and unlikely to give rise to substantial error in valuation. There should be no direct contact with the taxpayer or their agent. Where the information provided is insufficient to make a judgement on the relevant value band then the caseworker should notify HMRC within 20 working days of receipt of the case, specifying the information required and requesting HMRC to obtain it from the taxpayer. The case should be reported on CRAC within 20 working days of receipt.
If the information is received from the taxpayer HMRC will forward the information provided to the VOA. On receipt of the information a new case (credit type 01) should be opened and the valuation should be considered in accordance with the procedures in this Part.
PRBC cases should on first reference be considered on the basis of the information provided by the taxpayer and any office records. An inspection should not therefore be carried out in any first reference (credit type 01) PRBC case.
At the time of any PRBC request the taxpayer will not have established any claim for relief. If the taxpayer considers that the whole property is due a relief that will reduce the ATED charge to nil then no PRBC request can be made.
However, in some cases the taxpayer may not include part of a property in their valuation because they consider that a relief is due in respect of that part (e.g. part of the property is let to a third party on a commercial basis and is not, at any time, occupied, or available for occupation by anyone connected with the owner). Any advice on a PRBC request is based on the information provided by the taxpayer and this must be made clear in the report. If it subsequently transpires that HMRC do not accept that the taxpayer was entitled to relief in respect of the part excluded from the valuation then the PRBC advice will be null and void.
12.35 Valuation Report
If no further essential information is required, the caseworker should decide on the basis of the information provided by the taxpayer, together with any knowledge of the property and office records, whether or not the proposed banding may be accepted.
If the taxpayer’s proposed banding can be accepted HMRC should be advised accordingly and the report endorsed ‘as returned’.
If the taxpayer’s proposed banding cannot be accepted then the caseworker should report accordingly and notify HMRC of the value band that is considered to be applicable. The report should be endorsed as ‘not negotiated’ and also explain the reasons why the valuation submitted by the taxpayer cannot be accepted. The report should also clearly state that the opinion is based on the information provided by the taxpayer (for example, if part of the property has been excluded from the valuation because the taxpayer considers that a relief is due).
The report should normally be sent to HMRC by gsi e-mail (see paragraph 12.25 above).
12.36 Urgent cases
Taxpayers are encouraged to submit any PRBC request as early as possible because if they do not leave enough time for HMRC/VOA to consider their PRBC request, or further information is required, then it may not be possible to give the taxpayer a decision before the date they need to send in their ATED return. If cases are received near the ATED filing date they should be treated as urgent and every effort should be made to give taxpayers a decision before the date they need to send in their ATED return.
However, if it is not possible to give a taxpayer a decision before the filing date then HMRC’s advice is that if a taxpayer thinks they may need to pay ATED then they should submit a return along with the appropriate payment of tax. By doing this the taxpayer can avoid accruing interest or becoming liable for a penalty for sending the return late. Taxpayers are advised to submit their ATED return based on the banding they think is appropriate. If the VOA subsequently advise that the taxpayer’s proposed banding is not acceptable HMRC may then open an enquiry into the taxpayer’s return to enable further consideration of the valuation.
If after being notified that the VOA are unable to accept their proposed banding the taxpayer advises HMRC that they wish to discuss the valuation with the VOA then, if there is still sufficient time before the ATED filing date, HMRC will request the VOA to open negotiations with the taxpayer to endeavour to agree the appropriate banding.
On receipt of such a request the case should be re-opened as a referred back (03 credit type) case. The caseworker should then follow the same procedures as for a post-return assurance check case (see Part 4 below).
If it is not possible to conclude negotiations before the ATED filing date then the taxpayer will need to proceed as indicated in paragraph 12.36 above.
Part 4 – Case Procedures – post-return assurance check cases
After an ATED return has been received HMRC may request formal advice on the valuation adopted by the taxpayer in the return (see paragraphs 12.41 – 12.50 below).
HMRC may also in some cases request informal advice on the value of a property to consider whether a taxpayer who has not submitted an ATED return should have done so (see paragraph 12.52 below).
12.41 HMRC Request for formal advice
If HMRC decide to challenge the valuation adopted by the taxpayer in their ATED return they will open an enquiry into the return and obtain full information from the taxpayer on the property valued, the interest held and a copy of any supporting professional valuation report obtained by the taxpayer. All information obtained from the taxpayer will be attached to HMRC’s request for advice.
If there is insufficient information to identify the property then HMRC should be advised as soon as possible and no further action should be taken on the request until further information is received from HMRC.
All formal requests for advice should be dealt with in accordance with paragraphs 12.42-12.50 below.
12.42 Taxpayer’s banding acceptable
If on the basis of the available information, or after obtaining further information from the taxpayer, the caseworker is able to accept the banding put forward by the taxpayer then the case should be reported ‘as returned’. The report should usually be issued to HMRC within either 20 working days of receipt of the case or receipt of any further information requested.
If the case is reported on the basis of the information included in the request the credit type will be 01, if it is necessary to obtain further information from the taxpayer then the credit type will be 02 or 03 (see paragraphs 12.43 and 12.45 below)
12.43 Contact with taxpayer or agent
A letter should be sent to the taxpayer, or agent, advising that the case has been received and the name of the caseworker to whom it has been allocated in all cases not reported within 20 working days of receipt of the case.
In cases where further information is required this opening letter should include the request for the information required (see paragraph 12.44 below).
12.44 Further information required
On receipt of an assurance check case, the caseworker should as soon as possible consider whether there is sufficient information available to provide advice on the relevant valuation band or whether further essential information is required. The caseworker should consider the information provided by the taxpayer and any available office records.
Where the information provided is insufficient to make a judgement on the relevant value band then the caseworker should contact the taxpayer or their agent to obtain the further information required in accordance with paragraphs 12.45-12.46 below. If it is necessary to request further information the case credit type should be amended from 01 to 02.
12.45 Request for further information
The caseworker should seek to obtain any further information from the taxpayer, or their agent, within 20 working days of receipt of the case. The request for information should include a date by which it is required (usually 20 working days) and also advise the taxpayer, or agent to make contact if they are unable to meet this date. It is important for caseworkers to carefully consider the further information needed to ensure that they do not request information that has already been provided.
12.46 No Reply to request for information
If no reply is received to a request for information a reminder should be issued after 20 working days. The reminder should set out the information required again and advise the taxpayer that if it is not received within 20 working days the matter will be referred to the HMRC to consider seeking the outstanding information formally. If a substantive reply, or a refusal to supply the information, has not been received after a further 15 working days then the caseworker should telephone to seek an explanation for the delay. If the information is still not received by either 20 working days from the issue of the written reminder (ie. up to 60 working days from receipt of the case), or by the revised date agreed in the telephone call, HMRC should be notified so that the HMRC caseworker may consider using HMRC’s information powers (in Schedule 36, Finance Act 2008) to obtain the outstanding information. Pending receipt of the required information, the file should be reported and the taxpayer or agent should be notified of the request to HMRC to obtain the information.
The HMRC caseworker will advise SVT Hub when the required information has been obtained. When the required information is received the case should be reopened (credit type 03) and the caseworker should then proceed with the valuation and any negotiations required.
If the information is received by the VOA direct from the taxpayer, or agent, after HMRC has been asked to consider a formal request the caseworker should immediately notify the HMRC caseworker, so that any formal action may be halted. The caseworker should then arrange for the case to be reopened (credit type 03) and proceed with the valuation and any negotiations required.
12.47 Taxpayer’s bandings not acceptable
If on the basis of the available information, or after obtaining further information from the taxpayer, the caseworker is unable to accept the banding put forward by the taxpayer then the property should be inspected internally (see paragraph 12.48 below). If it is necessary to inspect the property then, if it has not been done already (see paragraph 12.42 above) the case credit type should be amended from 01 to 02. If after inspection the caseworker is still unable to accept the taxpayer’s banding then the case should be progressed in accordance with paragraph 12.49 below.
a. statutory powers
Paragraph 12A of Schedule 36 of the FA 2008 (as amended by FA 2013, Schedule 34, Part 1, paragraph 2), provides that an officer of HMRC may enter and inspect premises for the purpose of valuing, measuring or determining the character of the premises or property if the valuation, measurement or determination is reasonably required for the purpose of checking any person’s position as regards ATED. A person who the officer considers is needed to assist with the valuation, measurement or determination may enter and inspect the premises or property with the officer. This statutory inspection power is subject to conditions contained in paragraph 12B. An inspection using the statutory power contained in paragraph 12A may be carried out only if either Condition A or Condition B is satisfied. Condition A provides that the inspection is carried out at a time agreed to by the relevant person, and that the relevant person has been given notice in writing of the agreed time of the inspection. Condition B provides that the inspection has been approved by the tribunal, and any relevant person specified by the tribunal has been given at least 7 days notice in writing of the time of the inspection.
In most cases it will usually be possible to arrange an inspection for valuation purposes with the taxpayer (or the current owner or occupier of a property) by agreement without resorting to formal use of the statutory powers. When arranging inspections by agreement caseworkers should always follow the advice contained in the following paragraphs and if in any case inspection is refused or frustrated caseworkers must refer details of the difficulty to SVT Policy and Professional in accordance with sub-paragraph (c) below. Procedures for approving the issuing of notices to exercise the statutory powers and references to the tribunal for approval to meet the requirements of Conditions A and B above have been agreed with HMRC and SVT Policy and Professional will advise the caseworker on the appropriate action to be taken.
b. conduct of inspection
Caseworkers should always give prior notice of a proposed inspection and, if possible, confirm any verbal arrangements in writing before an inspection is undertaken. For tax confidentiality reasons the particular purpose of the inspection must not be disclosed to anyone other than the taxpayer or their agents. If some limited disclosure to anyone else is considered necessary the use of the phrase “for tax purposes” is appropriate. If a caseworker is confronted with a situation where only a minor (child) is present on the premises, under no circumstances should any inspection of the property be made either internally or externally. This also extends to the taking of, or checking of external dimensions. On returning to the office, the caseworker should send a letter to the occupier explaining the circumstances and, an appointment should be made with a request that an adult will be present on the next occasion. In all cases the caseworker should produce an authority to inspect.
c. inspection refused
If after attempting to arrange an inspection by agreement facilities to inspect are refused or frustrated the facts should be reported to SVT Policy and Professional within 5 working days of the refusal or the second failed appointment. The report to SVT Policy & Professional should give an estimate of the valuation required, based on an inspection without entry on to the property. HMRC should be advised, by either telephone or email, of the action taken. SVT Policy and Professional will then advise the caseworker how to proceed.
Where, following inspection the caseworker, is unable to accept the value returned the taxpayer should be advised of the caseworker’s opinion of value either within 30 working days of receipt of the case or 20 working days of the receipt of any further information or inspection. If no response is received from the taxpayer or agent reminders should be issued to the taxpayer/agent at 20 working day intervals.
Every effort should be made to conclude negotiations and report the case as soon as possible, the aim being to report all cases within an average of 100 working days.
If negotiations reach deadlock or the other side are not responding then an ‘unagreed’ report should be issued as soon as possible in accordance with the procedures in Part 5 of this Section and the case file closed. The case may be re-opened if it is referred back for further negotiations after HMRC have contacted the taxpayer.
12.50 Progress reports to HMRC
The caseworker should normally issue a progress report to HMRC at 13 weeks from receipt of the case. Detailed progress reports should be issued in all cases not reported after 100 working days , detailing the state of the negotiations and the values contended for by the VOA and the parties, and at two monthly intervals thereafter until the case is reported.
12.51 Reports to HMRC
Cases should be reported to HMRC endorsed either ‘as returned’, ‘agreed’ or ‘unagreed’ (see Part 5 below) as appropriate.
Reports should normally be sent to HMRC by gsi e-mail (see paragraph 12.25 above).
12.52 Informal requests for advice
If HMRC are requesting informal advice on the value of a property to consider whether a taxpayer who has not submitted a return should have done so, then the request will be clearly marked as a request for informal advice.
In such cases the information available to HMRC may be limited - but whatever information is available will be detailed in HMRC’s request. Every effort should therefore be made to provide advice based on the available information and making any reasonable assumptions.
HMRC will in their request make it clear that only not negotiated advice is required and that there must be no contact with the taxpayer. If any further essential information is required before a valuation can be provided in such a case then HMRC should be advised accordingly.
All requests for informal advice should be registered on CRAC as credit type 01 (see paragraph 12.21 above).
It is for HMRC to decide if a taxpayer qualifies for any of the reliefs from ATED (see paragraph 12.12 above). If a taxpayer raises any queries about the availability of a relief they should be advised to contact HMRC.
Part 5 - Unagreed/defendable on appeal procedures
12.60 Unagreed valuations
If it is not possible to reach agreement with the taxpayer on the appropriate banding then an ‘unagreed’ report should be issued to HMRC.
Issuing an ‘unagreed report’ to HMRC is the first step in a series of procedures which may culminate in a Tribunal hearing. Consequently, before reporting an ‘unagreed’ valuation to HMRC, the case must be thoroughly reviewed to ensure that any assumptions made are confirmed by the facts, that the supporting evidence is relevant and the valuation is prima facie defendable.
12.61 Statutory provision for appeals
Where the dispute concerns the market value of a dwelling any appeal shall be determined by the Upper Tribunal if the land is in England and Wales or by the Lands Tribunal for Scotland if the land is in Scotland (FA 2013, Schedule 33, Part 7, paragraph 54(3)).
Under Tribunal Procedure Rules all appeals “on questions of the value of land or interests in land arising in tax proceedings” are now allocated to the Upper Tribunal Lands Chamber in accordance with SI 2009 no 1021 [The First-tier Tribunal and Upper Tribunal (Chambers) (Amendment No. 2) Order 2009].
Before a case can be referred to the relevant Tribunal HMRC must issue an appealable decision and the taxpayer must appeal against that decision. The taxpayer may then at any time notify the appeal to the Tribunal; should this happen the matter must be referred at once to SVT Policy & Professional for instructions.
If a case involves a dispute not concerning the value of land (for instance there may be a disagreement as to extent of the property to be valued) then a preliminary reference may be made to the First-tier Tribunal to determine these issues.
12.62 Monitoring outstanding cases
Unless they have already been identified at an earlier time as being incapable of agreement all cases should be reviewed by the caseworker when they have been in the office for 80 working days. Any necessary action to ensure that negotiations are brought to a conclusion should be taken at an early stage to ensure that cases may be reported as soon as possible thereafter.
12.63 Review of case
As soon as it becomes clear that agreement is not possible consideration should be given to reporting ‘unagreed’. An unagreed report should only be issued when negotiations have genuinely reached deadlock or if the other side is not responding
Before reporting an unagreed valuation to HMRC the case should be thoroughly reviewed by the sector leader to ensure that:-
a. there is no prospect of agreement, negotiations have been exhausted and all correspondence has been answered. b. that an internal inspection has been undertaken of the subject property together with external inspections of all comparables. c. the approach to the valuation is correct in principle and law. d. subject to any disclosure consents being forthcoming, the available evidence adequately supports the opinion of value and any known evidence which could discredit the valuation is sufficiently outweighed by favourable evidence. e. if the valuation is largely or wholly unsupported because the evidence is scanty or non-existent the opinion of value is logical and reasonable having regard to all the circumstances. f. if factual information is in doubt, or has not been made available, the assumptions behind the valuation are reasonable. If in the event of those assumptions proving to be incorrect there would be a substantial variation in the opinion of value resulting in a different banding then the report to HMRC must make those assumptions clear and request HMRC to advise the taxpayer accordingly. g. consideration should be given to whether the case would benefit from ‘Alternative Dispute Resolution’ (ADR).
12.64 Report to HMRC
The unagreed opinion of value should be issued direct to the HMRC caseworker endorsed “Unagreed” and the report should state:-
- the actual valuation considered to be appropriate (ie. not just the appropriate value band)
- the reason why the valuation is unagreed (e.g. whether due to a difference of opinion, information not provided or the parties failure to respond)
- the parties latest valuation
- any information still required
- any assumptions made
- whether it is considered that there is a point of principle in dispute
- comments on the strength of the case with, if appropriate, an indication of a range of values (i.e. what is acceptable on the available evidence relative to what is the considered market value)
- if the case is considered suitable for ADR, make a reasoned recommendation to this effect (guidance on ADR can be found on HMRC’s Internet pages)
12.65 Case closure
When cases are reported on an ‘unagreed’ basis the file should be closed by the caseworker on CRAC.
It should be re-opened (credit type 03) when HMRC either requests the VOA caseworker to attempt further negotiations or sends the VOA a copy of a ‘Tribunal warning letter’ in accordance paragraph 12.67 below.
12.66 Informing the taxpayer
At the same time as the unagreed report is issued to HMRC a letter should be sent to the taxpayer, or agent, incorporating the following information:-
a. the taxpayer’s latest valuation b. the valuation being reported to HMRC c. a brief note of the basis and any assumptions made
No mention should be made at this stage that the case may become the subject of litigation as this is ultimately a decision to be made by HMRC.
12.67 Action by HMRC on receipt of an unagreed report
Following receipt of an ‘unagreed’ report HMRC will write to the taxpayer and advise them that unless an agreement is reached it will be necessary to consider a reference to the Tribunal. A copy of this Tribunal warning letter will be sent to the VOA.
12.68 Further negotiations
On receipt of a copy of HMRC’s Tribunal warning letter the case should be reopened (credit type 03) and the caseworker should write to the taxpayer or agent to enquire whether they wish to discuss the matter further before steps are taken to prepare the case for reference to the Tribunal. In any case where the failure to reach agreement is partly due to an inability to disclose evidence from confidential records (e.g. a valuation report submitted by a taxpayer in another ATED case) the caseworker may also at this stage seek consent to disclose the evidence - See Practice Note 4 and appendices regarding disclosure.
If negotiations are resumed HMRC should be advised and the caseworker should endeavour to bring the further negotiations to a conclusion as soon as possible. HMRC should be kept informed of progress throughout any further negotiations at 20 working day intervals.
If agreement can be reached on the appropriate banding the case should be reported accordingly. If the caseworker is not able to reach an agreement HMRC should be advised and informed of the caseworker’s latest unagreed valuation.
If the taxpayer does not respond to the invitation to negotiate within 8 weeks of HMRC’s Tribunal warning letter the caseworker should advise HMRC accordingly. The case should be kept open at this stage but if no further instructions have been received within 60 working days of having been reopened then the case should be closed .
12.69 Request for a DOA report
If, following any further negotiations under paragraph 12.68, the valuation remains unagreed HMRC will review the case to ensure that a reference to the Tribunal is appropriate and request a Defendable on Appeal Report (DOA Report).
In cases which involve particular difficulties or points of principle the request for a DOA Report may occasionally be routed via SVT Policy & Professional.
The purpose of the DOA Report is to provide the HMRC Solicitor with full details of the valuation dispute and a reasoned statement of the strengths and weaknesses of the case.
The DOA Report should comprise both a VO 1009 Case Summary and a full side-headed Appeal Report (see Appendices 7, 8 and 9).
12.70 Action on receipt of request for a DOA report
On receipt of a request for a DOA Report the VOA caseworker should:-
a. Prepare a DOA report and attachments in EDRM for approval and signing by the sector leader, who should add their comments, sign electronically and alert the appropriate Technical Adviser, SVT Policy & Professional to it. This should be completed within 20 working days of receipt of HMRC’s request.
b. If needed, take steps to obtain consents to the disclosure of any comparables on which the valuation is based using the letters in Appendices 35 & 36 adapted as appropriate, as well as obtaining any other documentary evidence (for example, auction particulars, planning consents or policy documents) required to prove a case before the Tribunal.
The reason for seeking disclosure consents at this stage is to avoid the need to seek an extension of time for filing expert witness reports should the appeal be notified by the taxpayer to the Tribunal with no advance warning having been given to the VOA. The issue of the DOA Report must not, however, be delayed pending receipt of any consents or other documentation.
12.71 Action by Technical Adviser (TA) on receipt of DOA report
The role of the TA is to confirm that, on the information provided, an objective review of the case confirms that prima facie the valuations are supportable and the case should proceed to determination. As part of the review the TA may wish to externally inspect the property or suggest further research before the report is approved and forwarded.
The TA should within 8 weeks of HMRC’s request:
a. Forward the DOA Report to the HMRC caseworker with any comments. b. Provide the sector leader and VOA caseworker with a copy of the TA’s comments to HMRC. (In legacy hardcopy cases, the file(s) will be returned to the VOA caseworker.)
12.72 Change case type
When a DOA report has been approved by the SVT Technical Adviser and issued to HMRC, the caseworker should ensure that the case is closed and re-opened as a ‘litigation’ case type 186 with credit type of 02.
12.73 Reference to the Tribunal
On receipt of the DOA Report HMRC will refer the papers to their ATED technical adviser, who will review the case and may discuss the way forward with SVT Policy & Professional. If appropriate, they may advise the HMRC caseworker to close the enquiry but before doing so to write to the taxpayer to set out the current position and say that the VOA are ready to resume negotiations. They will allow a month for a response and may approach VOA to find out whether there has been any further contact. If meaningful negotiations have not been resumed HMRC will close the enquiry. This may result in an appeal by the taxpayer who can then notify their appeal to the Tribunal at any time.
From this point the procedures in Section 6, Part 6 of this Manual should be followed.
12.74 Reference to the Tribunal by the taxpayer
If it is discovered that the taxpayer or agent has made a reference to the Tribunal, SVT Policy & Professional should be notified immediately.