Inheritance Tax Manual

Practice Note 1: appendix B - Earl of Ellesmere v Commissioners of Inland Revenue, (1918) 2 KB 735

The Valuation Office Agency's (VOA) technical manual relating to Inheritance Tax.

In this case the date of death was 13 July 1914.

The Appeal raised points of principle which are fully set out in the copy of the Referee’s Decision which follows.

The figures may be summarised as follows:- Principal Value
Returned at 68,000
Opinion of Value 77,000
Referee's Decision 75,618

Finance (1909-10) Act, 1910

Earl of Ellesmere and The Commissioners of Inland Revenue; Northampton, Brackley and Syresham.

Decision of Referee on Appeal.

This Appeal is in respect of a valuation of £77,000, of property in the Parishes of Brackley and Syresham in the County of Northants, comprised in the Schedule annexed to the Notice of Appeal, with the exception of the Town Hall and cattle pens in the town of Brackley and about an acre of pasture land on the Halse Road, Brackley which have been excluded from the valuation; and including agricultural holdings, accommodation holdings, private houses, cottages, shops or other business premises, and 557 acres of woodland.

The greater part of the woodland, and some of the agricultural land, form two blocks about 3 and 5 miles respectively from the town of Brackley, the remainder of the agricultural land and some of the accommodation land and a small part of the woodland are situate in one block extending from the borders of the town of Brackley to about 3 miles northward. This block is about 1½ miles from the nearest block of woodland and about 4½ miles from the furthest.

The private houses (which include a large residence of great cost), the cottages, shops and business premises, and some of the accommodation land lie in and near the town of Brackley.

It is stated in evidence at the hearing of the appeal that after the death of the 3rd Earl of Ellesmere, which occurred on 13 July 1914, the Appellant consulted an eminent firm of Auctioneers as to the sale of the whole Estate, and was advised by them that if he sold it in one lot he would probably obtain a lower price than if he divided it into lots for sale; but, on the other hand, that offering it for sale in lots involved a risk of some of the lots being left unsold for some time; and that the Appellant accordingly gave instructions to sell the Estate in one lot; and that after its having been well advertised it was accordingly sold to a land speculator and timber merchant in August 1915 for £68,000, including timber, of which price £25,000 was left by the vendor on mortgage of 4½%, the purchase to be completed six months after the end of the war.

Shortly afterwards the purchaser resold the farms privately in lots, and later resold the remainder of the Estate in lots at or some time after an auction held on 22 September 1915, for £64,920; excepting four lots, and the timber and the sites of the woods, which were still unsold at the date of the Appeal, it being admitted that the value of the four lots was £5,440, and that the timber was worth about £10,750. The purchasers at these re-sales were allowed to leave part of their purchase money on mortgage, the money so lent being the whole or part of the sum left by the Appellant on mortgage at the original sale in one lot.

It was argued on behalf of the Appellant that he was under no obligation to divide the Estate into lots for sale, and that the price he actually obtained after full advertisement by a sale in one lot was the market price of the Estate. On the other hand it was argued on behalf of the Commissioners that the true market price of the Estate could not be ascertained by a sale in one lot because the Estate consisted of a miscellaneous collection of property of various descriptions, not all of it even lying together, and was therefore unsaleable in one lot to anyone except a speculator buying for division and re-sale at a profit.

I am of opinion that the price paid by a speculator for the whole of the various properties comprised in the Estate in one lot is not the market price of the Estate, but that the market price in such a case as this is the aggregate of the separate prices of the various parts because the market price in one lot could only be ascertained by ascertaining the aggregate values of the parts and deducting from that such sum as would tempt a purchaser to buy in one lot for division and re-sale at a profit; and it is merely a matter for speculation what deduction would be sufficient for that purpose.

The decision on the Appeal in respect of which the annexed Notice of Appeal has been given is, therefore, as follows:-

That the Principal Value of the said Estate is Seventy-five thousand six hundred and eighteen pounds (£75,618); and I order that the Cost of the Appeal incurred by the Commissioners shall be paid by the Appellant.

I was requested by Counsel for both parties to state in my Decision two values - one of the Estate if sold in one lot, and other the value of the Estate if divided and sold in lots. I am of opinion that £68,000, the price actually obtained for that Estate in one lot, was probably a fair price for it if sold in that manner.

(Signed) HOWARD MARTIN Referee.

28 November 1917

The case came before the King’s Bench Division on 5 July 1918, 1918 2 KB 735, when it was held that the fact that the estate consisted of miscellaneous property not all lying together was evidence on which a Referee, to whom the value of the estate for the purposes of Estate Duty was referred, might find that the price which it actually fetched was not the market price within the meaning of s.7(5) FA, 1894, and s.60(2) Finance (1909-10) Act, 1910, but that the true market price was the aggregate of the prices which the several parts would have fetched if the estate had been broken up and sold in suitable lots.


The salient features of the decision are:- 1. The price realised by executors on the sale in the open market of a large and scattered estate in one lot is not evidence of principal value on death. 2. In comparable cases the evidence of subsequent sales by prudent lotting should normally form the basis of the District Valuer’s opinion, but where such evidence is not available, the prudence of lotting becomes a matter of opinion necessitating special care in advising a determination that can be substantiated on appeal.