Inheritance Tax Manual

Practice Note 1: appendix D - Commissioners of Inland Revenue v Clay and Another (Plymouth case), (1914) 3 KB 466

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

This was an Increment Value Duty case in which the facts were as follows:-

Mrs Buchanan was owner and occupier of No. 83 Durnford Street, East Stonehouse, Plymouth having purchased it in 1902 for £700. In September 1910, she sold it to Clay and others for £1,000. The purchasers were trustees of a nurses’ home, No 84, who wanted the house for the purpose of extending their home. The trustees would have been prepared to give up to £1,100. Regarding No. 83 solely as a residence for private occupation, its value was not more than £750.

The question to be decided in the case was whether £1,000 was the gross value of the house for the purposes of s.25(1) of the Finance (1909-10) Act 1910: “For the purposes of this Part of this Act, the gross value of land means the amount which the fee simple of the land, if sold at the time in the open market by a willing seller in its then condition, free from encumbrances, and from any burden, charge or restriction (other than rates or taxes) might be expected to realise.”

It was held in the Court of Appeal, (1914) 3 KB 466, affirming the decision in the King’s Bench Division, (1914) 1 KB 339, (1) that in calculating the gross value of the land the Referee was entitled to take into consideration the fact that the nurses’ home would be likely to offer more for it than it would be worth to anybody else, and that it could not be assumed that the nurses’ home would only have to make one bid beyond £750; and (2) that a “willing seller” is a person who is a free agent and cannot be required by virtue of compulsory powers to sell, but that, even if this was not so and the vendor was not in fact a “willing seller” the existence of a “willing seller” must be assumed for the purposes of the Section in question.