Section 27: general procedures
The Valuation Office Agency's (VOA) technical manual relating to Inheritance Tax.
This section deals with the procedures to be followed once a reference has been received from HMRC(IHT) and a case registered on the Case Registration and Control (CRAC) system.
Experience has shown that, once a few initial enquiries have been carried out, there has historically been no need to question the majority of valuations returned by taxpayers for IHT purposes. Therefore, it is important to ensure that both HMRC(IHT) and VOA resources are concentrated on those cases where a variation in the returned figure is likely to be achieved.
It is one of the fundamental principles of these procedures that, once a reference has been made to the VOA and a case has been opened, it should remain open until it is either agreed or HMRC(IHT) advises the DV that no further action is required. Therefore, whenever these instructions state that the DV should consult with HMRC(IHT) on any aspect, caseworkers must ensure that they continue to deal with other aspects of the case pending a reply on the point raised.
For the avoidance of doubt this section does not apply to references from SV (unless specifically stated otherwise). The procedures for dealing with such references are set out in Parts 2 & 3 of Section 16.
Part 1 : Initial Appraisal Cases
Most references from HMRC(IHT) will come from Primary Compliance and Support (PC&S). Such cases will normally be referred on Form VOA 1 and these should initially be registered as type 177/01.
Cases where HMRC(IHT) has already opened an enquiry will be referred to the VOA by their Compliance Group and these will normally be referred on form VOA 2 (unless they have been routed via the Initial Appraisal Unit). Such cases should also initially be registered type 177/01; unless HMRC(IHT) has requested specific advice, in which case they should be registered as type 180/01 or 185/01, as appropriate.
On receipt of the case papers, the case should be allocated a complexity weighting (see Section 26 para 26.32) and this should be clearly written on the top right hand corner of the lead sheet of the papers. It is appreciated that, at this stage, it will not always be possible to identify all the criteria outlined in Section 26 para 26.32 (e.g.. where the valuation is likely to incorporate an addition for “hope” or “marriage” value) and, accordingly, scope is given to amend the complexity weighting at later stages in the life of the case (see 27.14 below). For procedure on receipt of Referred Back references, see 27.81 below.
27.3 Purpose of the Initial Appraisal
The purpose of the Initial Appraisal is for the DV to determine whether, based on reasonable assumptions made from the desk, the figure returned by the parties is acceptable or whether it requires further investigation.
Although some limited contact with the parties takes place at this stage (see 27.6 below), this is purely for the purpose of obtaining background information in respect of proposed or completed sales. Valuations should not be discussed at the Initial Appraisal stage - unless there has been an intervening sale (see para 27.8 below). HMRC(IHT) should be advised whether the parties have been contacted, when the DV makes the Initial Report (see 27.9 below).
27.4 Time Limits
The Initial Appraisal must be completed within 20 working days of receipt. Within this period, the case must either be reported to HMRC(IHT) (see 27.10-12) or HMRC(IHT) advised that it has been reclassified as a Valuation case (see 27.14). In practice, most Initial Appraisals should be completed well within this time limit and, in this respect, it is important to note that, in the Service Level Agreement with HMRC(IHT) for the Financial Year 2006-7, the VOA has contracted to complete Initial Appraisals within an average time of 12 working days from receipt.
As mentioned at 27.3 above, the Initial Appraisal is essentially a desk based exercise. The DV is required to form a view as to whether the figure returned by the parties appears reasonable. This view should be based on the caseworker’s own knowledge of the area in which the property is situated and from an examination of relevant office records. These records will include:
- rating and council tax details (in England and Wales only)
- Digital Maps, DEFRA plans, Geological plans etc.
- Any Photographs held on VO Photographer
- details of sales of comparable properties. These will be obtained from a number of sources including the COVO system, auction results and other office records
- copies of planning records including Unitary Development Plans
- press reports
- any other records
Because no paper records are held at the Nottingham Initial Appraisal Unit (see section 26 para 26.19), only electronic records are used there (namely coding details held on the Central Database, Digital Mapping, VO Photographer etc). Similarly, in order to save time in file assembly, caseworkers in local offices should only have recourse to electronic records wherever possible.
Finally DVs must ensure that the Appraisal is not too time consuming. HMRC(IHT) fully accepts that cases which are reported at this stage will be those where a decision can be effectively taken from the desk or with minimal enquiry - normally cases involving single houses with little development potential and where comparables are not too difficult to find.
27.6 Contact with Parties
Providing HMRC(IHT) has not stipulated the parties should not be contacted, caseworker support should contact the parties to ascertain the position in respect of any sales. The opportunity should also be taken at this stage to request any information missing from the papers, e.g. valuations.
Any contact with the parties should be by telephone but if either the party or the caseworker is deaf or hard of hearing, contact can be made in writing, or the minicom telephone service can be offered if the party has this facility. Language line may also be used as a telephone interpreting facility for non-English speakers, in order to save time, the parties should be encouraged to fax copies of any further information required; or, if the property is on the market for sale via an agent, copies of the particulars can be down-loaded from the internet, where these are available.
Full notes of any discussions with the parties should be made (the Sale Contact Sheet, available from the Caseworker Support Material can be used for this purpose) and should be signed and dated by the person conducting the call.
The appraisal must not be unduly delayed because information is required and if nothing is received within 5 Working Days of the initial request, advice should be sought from the caseworker as to how to proceed.
If it is ascertained that the property has sold, the DV should proceed in accordance with 27.8 below. If contact is made with the parties during the Initial Appraisal, DVs should also note the instruction at 27.13 below.
27.7 Valuation Tolerances
It is appreciated that, when considering whether a returned figure is reasonable, caseworkers will often decide to take no further action if it falls within what they consider to be normal valuation tolerances.
Valuation tolerances are widely used throughout the surveying profession because it is generally recognised that valuation is not a precise science and, short of exposing a property to the market, it is normally impossible to judge precisely what a purchaser would have paid for it at a particular point in time. The valuer may, therefore conclude that any value falling within a given range is reasonable.
It is important to avoid a mechanistic approach when applying tolerances. This is because it is normally the case that the more difficult a property is to value, the wider the range of tolerance is likely to be. The range band will vary with regard to such factors as type of property, availability of comparable evidence, state of repair, development prospects etc.
Caseworkers should employ caution when using tolerances, especially in the case of high value properties.
Finally, when applying tolerances caseworkers should also bear in mind the rate at which tax will be charged. HMRC(IHT) will advise on Form VOA 1 or VOA 2 when tax is to be charged at a rate other than 40% (see Section 26 para 26.15). In practice, this will be in cases involving:
- Failed Potentially Exempt Transfers where tapering relief is available (see Section 4 para 4.23)
- Immediately chargeable lifetime transfers where tax is charged at 20% (see Section 4 para 4.1)
- Settled property (see Section 8). In particular DVs should note Section 8 para 8.37 regarding the taxing of discretionary trusts - the maximum rate of tax is 6%.
27.8 Cases where property has sold
Where it is ascertained that an item of real property within a deceased’s estate has been sold at a price different from the returned figure, and either the estate is in duty or adopting the sale price would bring it into duty, the DV can ask the parties whether they wish to revise the returned figure. The parties are then likely to respond in one of three ways, namely:
- they may wish to substitute the sale price for the returned figure
- they may wish to maintain the returned figure and not adopt the sale price
- they may wish to adopt neither the sale price nor the returned figure and, instead, suggest an alternative figure.
Once the parties’ proposals are known it is up to the DV to decide whether, based on office records and information available, they are acceptable (NB. 27.31 below re sales in a rising market). If they are acceptable, and there are no other items outstanding, the case should be reported to HMRC(IHT) on Form VO 1120 in accordance with 27.10 below. If they are not acceptable, or there are other items outstanding where the returned value cannot be accepted, the DV should proceed in accordance with 27.14 below.
Completion of Initial Appraisal
Once the DV has completed the Initial Appraisal, an Initial Report must be completed and emailed to HMRC(IHT), using Form VO 1120. The email should be sent to the email address shown on form VOA 1 or 2 and the “Date of VO 1120 dispatch” on form VOA 1 or 2 should be completed.
Form VO 1120 (see Appendix 4) provides two options. These are:
- No question need be raised.
- The value returned cannot be accepted on the evidence presently available. The matter will now receive a full evaluation and a report issued as soon as possible.
HMRC(IHT) also needs to be notified of details of any item which has sold since, following the sale of an item, the instalment option for paying IHT is not open to the parties.
At the same time the DV should complete the 3 boxes at the base of form VOA 1 or VOA 2 (see 27.10 and 27.14 below with regard to the completion of the “valuation accepted” box).
A copy of the VO 1120 and the sent email to the HMRC(IHT) Mailpoint should be retained on the file, for audit purposes.
NB. Occasionally HMRC(IHT) will request valuations, under the same reference, at different dates. Accordingly the DV must ensure that the Nature of event and Date of event boxes are completed before sending form VO 1120 to HMRC(IHT). Also for Part cases within a single DV unit area (see Section 26 para 26.30), caseworkers must ensure only one VO 1120 is sent to HMRC(IHT) (normally by the co-ordinating caseworker).
27.10 Tax-paying estates where returned figure can be accepted
In tax-paying estates if, either from knowledge of the property or from office records, the DV concludes that either the figure returned or, a figure subsequently offered by the parties in accordance with 27.8 above, does not merit further investigation, reply (a) of VO 1120 should be completed and a tick inserted in the “Value accepted” box on Form VOA 1 or VOA 2.
NB. In multi-property cases where only some of the returned figures can be accepted, the DV should still complete this box and specify those item numbers (using the same numbering as appears on Form D12 or IHT 37) in respect of which values have been accepted; however, a cross should be inserted in the “Value accepted” box on Form VOA 1 or VOA 2. See para 27.14 below with regard to the completion of VO 1120 for those items where values cannot be accepted.
In addition, if any item has sold, details of the sale must be inserted in the Property sales section as follows:
i) where the sale price is the same as the returned figure
the sale price should be inserted in both the “sale price” and “value accepted” boxes
ii) where the sale price is to be substituted for the returned figure
the section should be completed as in i) above
iii) where an alternative figure to the sale price is to be substituted for the returned figure
the sale price should be inserted in the “sale price” box and the value offered should be inserted in the “value accepted” box.
NB. Once the DV has advised that a case does not warrant further investigation, HMRC(IHT) will treat it as being settled and will not re-open it unless either the parties request that a higher sale price should be substituted for the returned figure or if there is reason to suppose that the valuation was based on erroneous information (see Part 5 below).
27.11 Sub-threshold estates
The procedure to be followed in sub-threshold estates will depend on whether the case is a single DV unit case or a multi-district case (see Section 26 para 26.24).
i) Single DV unit cases
Where, from knowledge of the property or from office records, the caseworker concludes that any likely increase in value will not bring the estate over the tax threshold, reply (a) of VO 1120 should be completed. In addition, if any item has sold, details of the sale should be inserted in the “sale price” box of the Property sales section and the “value accepted” box should be left blank.
ii) Multi-district cases
Where, from knowledge of the property or from office records, the caseworker concludes that any likely increase in value will not bring the estate over the tax threshold, before using reply (a) of VO 1120, the caseworker should first consult with any other DV units involved (see Section 26 para 26.29), to ensure that any increases in their valuations will not have the effect of bringing the estate into tax.
If the total valuations do not bring the estate over the tax threshold, or if it is concluded that the value(s) returned can be accepted, the caseworker should proceed in accordance with (i) above. If it is concluded that the value returned cannot be accepted, the caseworker should proceed in accordance with 27.14 below.
27.12 Prior agreed cases
Where the DV has already prior agreed values in accordance with Section 31, reply (a) of VO 1120 should be completed and the following words should be inserted immediately after it: “The returned value has been prior agreed with the parties”.
If, notwithstanding the proviso in Section 31 para 31.10, any item has sold, details of the sale should be inserted in the Property sales section.
27.13 Advising parties where values are accepted
If the returned value can be accepted in accordance with 27.10 or 27.11 above and contact has been made with the parties, in order to comply with the VOA Charter Standard Statement, the DV must advise the parties that the papers have been returned to HMRC(IHT). The DV should be careful to avoid giving the impression that the returned value has been agreed but, if pressed, should state that it has been decided not to question the returned valuation.
27.14 Returned values cannot be accepted
Where the DV decides that: either based on available information the returned value of any item cannot be accepted; or, there is insufficient information to decide whether the returned value of any item can or cannot be accepted, the file should be noted accordingly and the case should be reclassified as a Valuation case (Type 180/01 or 185/01) and, if not already done so, under 27.6 above, first contact should be established with the parties (see 27.20 below). N.B. for cases where the Initial Appraisal has been carried out by the Nottingham Initial Appraisal Unit, the case type will be changed and the case re-registered at the Registration Centre(s) for the DV Unit(s) involved (see the Process Maps) for further details).
Reply (b) of VO 1120 must be completed and emailed to HMRC(IHT) and a cross inserted in the “Value accepted” box on Form VOA 1 or VOA 2. Additionally, in multi-property cases where the returned values of some items can be accepted, Reply (a) should also be completed and the numbers of those items (from Form D12 or IHT 37) should be specified. Consideration should also be given at this stage as to whether the complexity weighting (see Section 26 para 26.32) allocated to the case requires amendment (e.g. because it has been ascertained that the valuation is likely to incorporate an addition for “hope” or “marriage” value). The caseworker should then proceed in accordance with Part 2 below.
Part 2 : Valuation Cases
A reference will be classified as a Valuation Case when either HMRC requests specific advice or it has been reclassified from the Initial Appraisal stage (see para 27.14 above).
It must be remembered that time limits and targets run from the date that a reference is first received in the IAU (or in the cases of Referred Back cases – in the location) and not the date it is reclassified from the Initial Appraisal stage.
In the vast majority of cases, the caseworker should issue an opinion of value within 40 working days of receipt (see para 27.36 below). However, it is appreciated that there will be some instances where it proves impossible to form an opinion within this period (e.g. because vital information has not been forthcoming or the valuation considerations are particularly complex). In such circumstances it is essential to keep HMRC advised of the current position (particularly if the case has been referred by one of their Compliance Groups). Where a reference is still classified as a Valuation case after 60 working days from receipt, caseworkers should note the requirement to provide HMRC with an Interim Report (see para 27.43 below).
The issue of an opinion of value must not be delayed because a property is on the market for sale, even where it is considered to be of a speculative nature (see para 27.40 below for cases where the caseworker considers that negotiations should be delayed when it is considered advantageous to await the sale of a property which is considered to be of a speculative nature).
The VOA Initial Report (VO 1120) will act as an acknowledgement. For the avoidance of doubt, HMRC) do not require a separate typed acknowledgement in these cases. In other cases (e.g. where HMRC has requested specific information), a typed acknowledgement should be sent within 20 working days, if the information cannot be supplied within that period.
For the avoidance of doubt, no separate acknowledgements are required where a case has been referred to a caseworker via the Nottingham or Glasgow IAU.
It should be noted that CEO provides HMRC with a monthly list of all cases outstanding with the VOA. This list contains details of the current VOA caseworker, as registered on the Central Database and accordingly, it is important to ensure that details of the caseworker currently dealing with the case are entered on the Central Database.
27.19 Subsequent contact with HMRC)
The degree of contact with HMRC) will normally depend on whether the case has been referred to the VOA by the PC&S or Compliance group.
For cases referred by PC&S, it should not normally be necessary for the caseworker to contact HMRC before either Form VO 1101 is sent to the parties (see para 27.36 below) or, where the Returned Value(s) can be accepted, a Final Report is issued (see para 27.55 et seq below).
When the instructions do specifically call for subsequent contact, it is envisaged that this will normally either be: by email; or (where copies of correspondence etc. in non-electronic format are to be sent), in writing either via HMRC Accounts Office, Cumbernauld or by Taxpost Direct. Such contact should normally be in the format prescribed in Form VO 1103 (see paras 27.22, 27.37, 27.39, 27.40, 27.41 and 27.43 below). However, where appropriate, HMRC is happy for the VOA caseworker to contact their caseworker, or caseworking team, by telephone. In such circumstances, a signed and dated note of the conversation must be placed on the file. Submissions under para 27.45 (whether a determination is required) and para 27.50 (initiation of 120 day review) must always be either by email or in writing.
For cases referred by Compliance, caseworkers should note an enquiry will already have been opened and the case will have been allocated to a specific Compliance caseworker. In such instances, HMRC expects the caseworker to maintain regular contact with their caseworker, particularly where any problems are encountered or when valuations are put to the parties. Such contact will normally be by telephone or email
It must also be appreciated, irrespective of who has referred it, HMRC) will be keeping the case constantly under review and if, at any time, they decide that the tax at stake does not warrant the VOA continuing with it, they will request the caseworker to close the case. In such circumstances, the case should be reported by completing either Part 1a) or Part 1b plus Part 4 of Form VO 1110 (see para 27.55 and para 27.70) and Parts 2 and 3 where appropriate (see para 27.61 and para 27.68).
HMRC may also find it necessary to request expedition of certain cases. This will usually be because the parties are pressing for a settlement of the case; or else either, no acknowledgement has been received or, no interim report has been received after 60 working days (see para 27.43 below). HMRC will normally do this by issuing a Form VOA 4 (see Appendix 10). HMRC use VOA 4 as a multi-purpose form, namely;
- as a reminder for a progress update
- as a notification of any sales of which HMRC has been made aware
- as a notification of a claim for Fall in Value relief under section 191 IHTA 1984 (see Section 12)
- as a response to a caseworker’s request as to whether a Determination of Value is required (see para 27.46 below).
If it is being used as a progress update, it must be completed and returned immediately; a copy should be kept on the file and the case dealt with as a matter of priority. It should be noted that if the VOA 4 has been sent to the VOA as a Word attachment to an email, any reply should also be sent by email (unless paper documents need to be attached) and a copy of the sent email should be retained on the file.
Contact with parties
Unless HMRC have specifically requested that the caseworker/support should not contact them, the parties must be contacted within 20 working days of receipt of instructions from HMRC.
Contact will normally have been made by the IAU during the Initial Appraisal stage (see para 27.6 above). However, on receipt of the case in the local office, caseworkers must ensure the first contact is with the taxpayer’s representative named on Form IHT405 (or equivalent). This contact should be made within 20 working days of the receipt date shown on CRAC and the purpose of this contact is to either:
- request an appointment to inspect, or
- request further information (see para 27.21 below), or
- advise the parties of the caseworker’s details, in the format set out in VO 1105 (see Appendix 9).
It should be noted the person named on the IHT405 may be the agent who carried out the original valuation and they may not be instructed to discuss the case with the VOA. If the caseworker believes this to be the case, they should contact HMRC and request details of an alternative person they can contact.
If contact is not in writing, notes of any discussions must be placed on the file and signed and dated by the person conducting the call.
Once contact has been established, caseworkers must ensure that contact is regularly maintained (i.e.. at no greater than 15 working day intervals) with either the parties or their representative. In particular, they must ensure that the parties are kept informed where action is delayed because information has been requested from a third party, e.g. a Local Planning Authority (see para 27.24 below).
It is imperative that the time limits referred to above are strictly adhered to, in order to avoid accusations of delay by the VOA.
In death cases, all negotiations with regard to value must be carried out with individuals who have been authorised to act by the deceased’s executors. If any other individual contacts the caseworker with a view to agreeing values (e.g. a beneficiary who is not an executor), the caseworker should satisfy him or herself that the individual has been authorised to act. In cases of doubt the caseworker should contact HMRC and advise them of the circumstances.
27.21 Additional information required from parties
Once a reference has been received in respect of a property and a case has been registered it is, in the first instance, the caseworker’s responsibility to obtain any further information from the parties. Where it is required in order to carry out a valuation, further information should be requested at the earliest opportunity and, ideally, at the same time as when the parties are first contacted in accordance with para 27.69 and para 27.20 above. Care must be taken to ensure that information is not requested which has already been provided by HMRC or the IAU.
27.22 Parties fail to supply information
If the parties do not respond to a request for information within 20 working days, a reminder must be sent.
If the parties fail to respond to the reminder within 10 working days or if they refuse to supply the requested information, the caseworker must immediately advise HMRC of the circumstances. It should be noted, HMRC have comprehensive information gathering powers; however, these powers can be compromised if action is delayed. Accordingly the time limits referred to above must be strictly adhered to.
This should normally be by email, including an Interim Report on Part 1 of Form VO 1103 (Appendix 13), which should be completed as follows
1a) must be completed and the (electronic) copies of any documents referred to, i.e. the original request for information, the reminder and (in cases where they have refused to supply information) any correspondence from the parties must be attached. If contact has been by telephone, reference should be made to the dates of any calls, the name of the person contacted and details of the required information.
1b) must be completed giving the reason as to why the information is required (e.g. where the caseworker is trying to establish who is responsible for repairing a particular property)
1c) should comprise, an estimate of value, or an opinion in respect of the requested advice, based on the information currently available. If the caseworker has insufficient information to provide this, sub-paragraph 1e) must be completed
1d) any assumptions made in arriving at the opinion at sub-paragraph 1c) must be stated
1e) should be completed as an alternative to sub-paragraph 1c) if the caseworker holds insufficient information to supply an estimate or opinion.
In multi-property cases, where information is only lacking in respect of certain items in a reference, the caseworker should complete Part 1 of VO 1103 in respect of those items only. Details of the current position in respect of the other items must be provided, by completing Part 2 (see paras 27.39, 27.40 and 27.41 below) or Part 3 (see para 27.43 below) of VO 1103 as appropriate.
Once contacted by the caseworker/support in accordance with the above, HMRC may then contact the executors (who may not even be aware of the fact that information has been requested) and, if the information is still not forthcoming, will consider using their information gathering powers. If, in the mean time, the parties contact the caseworker/support direct, HMRC must immediately be made aware of this. HMRC will, in turn, keep the caseworker informed as to any action taken. The VOA case should, of course, be kept open.
If HMRC’s intervention results in the requested information being provided, the caseworker should continue with the case as normal. If, on the other hand, HMRC advise that they have been unable to obtain the information and instruct the caseworker to continue with the case, (e.g. because potentially substantial values are involved that might outweigh the appropriate penalty charges), the caseworker should proceed as instructed by HMRC.
27.23 Parties query information supplied by HMRC
If the parties query information already provided by HMRC, (e.g. where they query the basis of occupation of a property), HMRC should immediately be advised of the position and discussion with the parties on this particular point should be postponed pending further instruction.
27.24 Additional information required from third parties
There will be occasions where the caseworker will need to obtain information from a third party (eg. information from a Local Planning Authority where the caseworker is trying to establish whether planning permission for development was likely to be forthcoming at a particular date).
If this third party fails to provide required information within 15 working days of the original request, a reminder must be sent.
If this third party still fails to provide the required information within 10 working days of the reminder, the caseworker must immediately advise HMRC of the circumstances, in accordance with para 27.22 above.
HMRC will then consider whether there is anything they can do to obtain the information and will advise the caseworker on how to proceed.
27.25 Statutory provisions
Paragraph 12A of Schedule 36 of the FA2008 (inserted by paragraph 5 of Schedule 48 of the FA 2009) provides that an officer of Revenue and Customs may enter and inspect premises (and any other property on the 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 Inheritance Tax. 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 parties (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 CEO, in accordance with paragraph 27.28 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 CEO will advise the caseworker on the appropriate action to be taken.
27.26 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. This is especially so in lifetime transfer cases. If some limited disclosure is considered necessary the use of the phrase “for revenue purposes” is appropriate. If for any reason an inspection is attempted without formal notice, tactful enquiries should be made as to whether it is convenient for an inspection to take place. If the slightest objection is made, or it would be imprudent to do so, the inspection should be postponed until after formal notice.
If an officer 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 dimensions. On returning to the office, the officer 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.
27.27 Authority to be produced
In all cases the caseworker should produce an authority to inspect.
27.28 Inspection refused
If after attempting to arrange an inspection by agreement facilities to inspect are refused or frustrated the facts should be reported to CEO within 5 working days of the refusal or the second failed appointment. The case file should also be forwarded with a memorandum giving an estimate of the value transferred, based on an inspection without entry on to the property. HMRC should be advised, by either telephone or email, of the action taken.
CEO will then advise the caseworker as to how to proceed.
27.29 Circumstances where inspection may be dispensed with
Subject to the exceptions listed below, caseworkers should endeavour to internally inspect all properties, prior to issuing an opinion of value, where the returned figure cannot be accepted. As well as Initial Appraisal cases, the exceptions are:
- cases where HMRC have instructed that an opinion of value should be provided without inspection
- value below tax threshold: where the cumulative total, including the present transfer at the returned figure, is less than the tax threshold, and it is clear that the valuation will not increase the cumulative total above that threshold. In such cases, the caseworker should proceed in accordance with para 27.35 below
- cases where the property has been sold (or sale agreed) at a figure different to the value returned and it is either proposed to adopt the sale price or, where there has been either a general rise or fall in price levels or a change in circumstances between the dates of death and sale, to adopt an intermediate figure (see para 27.36 below).
- where the caseworker considers they already have sufficient information on which to base an opinion (e.g. because the property has recently been inspected for local taxation purposes).
It is accepted that there will be certain circumstances where an internal inspection will not be feasible, e.g. where an estate consists of a large number of tenanted houses the caseworker may consider that only a sample of the properties should be inspected, or where a property has been gutted by fire and making an internal inspection would be dangerous. However, where an internal inspection has been dispensed with, this should be made clear to the parties when they are advised of the caseworker’s opinion of value.
27.30 Inspection of comparables
Although, prior to the issue of an initial opinion of value, it will not normally be necessary to inspect comparables, caseworkers should take sufficient steps to satisfy themselves that the information that they hold regarding comparable properties is correct, e.g. ensuring that the details appearing on COVO print-outs agree with other data sources.
Property sold: Transfers on death
Before adopting a sale price as an opinion of value the caseworker should ensure that there have been no changes in the circumstances between the date of death and the date of sale which would have had a material effect on value.
It should be remembered that IHT valuations should be based upon values as at the date of death and, in a rising market there may well have been a considerable escalation in values between death and sale. In such circumstances, even though the parties may have volunteered to substitute the higher sale price, caseworkers must always ensure that the value eventually adopted is in line with values prevailing as at the date of death.
Where an item has sold, parties sometimes claim that the sale price should be adjusted to exclude other items included in the consideration, e.g. chattels. Where such other items would have comprised part of the deceased’s estate, HMRC should be advised of the circumstances so that they can check that the value claimed for them is consistent with the value returned.
27.32 Possibility of claim for Fall in Value Relief
Where the sale price is below the returned figure, Fall in Value Relief under s191 of the Inheritance Tax Act may be available. How the caseworker should then proceed will depend on the circumstances of the case.
If the market has fallen and the caseworker is of the opinion the returned value is not understated, in paper-based cases, the case should be reported with the endorsement “As returned” and sub-paragraph i of Form VO1120 should be completed (see para 27.55 below). The caseworker should make it clear in any contact with the parties that it is for HMRC to decide whether Fall in Value Relief is applicable.
If, on the other hand, the caseworker suspects the returned value has been deliberately over-stated, (e.g. because no or little IHT is likely to be payable because the estate is on or near the IHT threshold; or Agricultural Relief or Business Property Relief is available and the value determined for IHT purposes will be used as the base value for Capital Gains Tax purposes) the caseworker should enter into negotiations with the parties. The caseworker should also liaise closely with HMRC since it may well be the case that a reduction may take the estate below the chargeable threshold or 100% Agricultural Relief or Business Property Relief may be available and the need to agree a valuation may prove to be unnecessary.
See section 12 for further information on Fall in Value Relief.
27.33 Special purchaser
If the caseworker is proposing to adopt a sale price paid by a sitting tenant or other special purchaser, it may be necessary to make enquiries to establish whether the same figure would have been appropriate at the date of death (see Section 7 para 7.5 et seq).
27.34 Enforceable contract for sale or Notice to Treat at date of death
If, prior to the date of death, either an enforceable contract for sale has been entered into or a Notice to Treat has been served or has been deemed to have been served and a price fixed, then an equitable conversion of the property into cash has taken place and the question of the value of the property itself will not normally be referred to the VOA. Should it be discerned, on receipt of a case, that a property may have been the subject of an equitable conversion at the date of death, the caseworker should advise HMRC accordingly and await further instructions.
The opinion of value
27.35 Parties figure acceptable
Where, after further investigation or inspection, the values returned by the parties can be accepted, the case should be reported to HMRC, by completing Form VO 1110 (see para 27.55 and Appendix 14).
If, on a death case, the proposed valuation does not raise the cumulative total above the tax threshold operative at the date of death, Part 1b)x of VO 1110 should be completed. This procedure, however, must not be adopted for lifetime transfers.
Provided that contact has been made with them, the parties must be notified that the returned values have been accepted and the matter reported to HMRC. Part 4 of VO 1110 should be endorsed accordingly.
27.36 Parties figures not acceptable
Except in the following cases:
- those involving leases for life (see Section 8); or
- those where the proposed valuation does not raise the cumulative total above the tax threshold operative at the date of death (see para 27.35 above); or
- those where the property has been sold for a figure less than the valuation and a claim for Fall-in-Value Relief seems likely (see Section 12, para 12.74),
in all instances where the returned figure is not acceptable, the parties should be notified accordingly. In the vast majority of cases an opinion of value should be issued within 40 working days of receipt of the case. It is, however, accepted that in some cases this will not be possible because, for example, essential information has not been forthcoming or the valuations are particularly complex.
Before sending the notification, caseworkers must satisfy themselves that the addressee has the authority to act in respect of the estate (see para 27.20 above).
This notification should preferably be in writing, normally using Form VO 1101 (Appendix 11), inserting the total value of the properties and the “agricultural value” if appropriate. The properties should be listed to show the value proposed not only for those where the value returned is unacceptable but also for those where the returned or offered value can be agreed. This is to help parties ensure that the interests and values for the estate are correctly identified and complete. Col(3) of the VO 1101 should furnish the minimum indication necessary to this end; in particular, if the property valued is subject to a tenancy or lease this fact should be stated (e.g. “FH subject to tenancy”).
The parties should be advised if any property has not been inspected (see para 27.29 above) and of any assumptions made which, if they should prove to be incorrect, would give rise to a significant change in the proposed valuation. Examples of such assumptions include:
i) where the valuation assumes that planning permission is likely to be granted for development;
ii) it is assumed that vacant possession can be obtained of a property which is occupied by a third party;
iii) it is assumed that a special purchaser would have been in the market for the interest in question.
Form VO 1101 should not be used where the value transferred differs from the value of the property transferred (see Section 4 para 4.16 et seq), or when its use would obviously be inappropriate or would not clearly convey the required information. In such instances the parties should be notified of the valuation by letter including therein all the information which would normally be shown on Form VO 1101.
If the notification of opinion is not made in writing, full details of all telephone conversations etc. in respect of the opinion must appear on the file and must be signed and dated by the caseworker.
Where the case has been referred to the VOA by a Compliance Group of HMRC (see para 26.19 above), the caseworker should, at the same time, also advise the Compliance caseworker of their valuation.
27.37 Parties agree to caseworker’s figure or suggest an acceptable alternative
Where the parties reply to Form VO 1101, either agreeing with the caseworker’s figure, or suggesting an acceptable alternative, the case should be reported to HMRC by completing Form VO 1110 (see para 27.55 below) within 10 working days of the receipt of the reply. In those cases where, the caseworker has accepted an alternative figure offered by the parties, they should be advised of the action taken.
Where the parties have agreed verbally the caseworker should advise HMRC accordingly, preferably by completing Part 3 of Form VO 1103 (see paras 27.19 above and 27.43 below). HMRC) will then seek confirmation of the agreement from the parties and, in appropriate cases, invite a deposit. If agreement is forthcoming, HMRC will advise the caseworker accordingly and the case can be closed. If agreement is not forthcoming, HMRC will advise the caseworker as to how to proceed.
27.39 Parties do not agree
If the parties cannot agree to the caseworker’s valuation or if the caseworker cannot agree with their revised opinion, the caseworker should open negotiations and proceed in accordance with para 27.44 below.
If they have not already been made aware, HMRC must immediately be notified of the position by the caseworker, preferably by completing and dispatching Part 2 of Form VO 1103 (see para 27.19 above). The name of the person/firm with whom the caseworker is negotiating should be stated when completing sub-paragraph 2f) of VO 1103.
27.40 Parties are not prepared to discuss as the property is on the market for sale
If the parties cannot agree to the caseworker’s valuation and they state that they are not prepared to negotiate because a property is on the market for sale, the caseworker should, within 10 working days of receipt of their response, advise HMRC, preferably by completing and dispatching Part 2 of Form VO 1103 (see para 27.19 above). If the asking price is known, this should be stated when completing sub-paragraph 2h) of VO 1103. Any comments that the caseworker might have on the asking price, especially when it is higher than the caseworker’s valuation, should also prove useful.
If a property which is considered to be of a speculative nature is on the market and there are few, if any, comparables; if the caseworker considers that negotiations should be delayed because awaiting a sale might be advantageous, HMRC should be advised accordingly. The parties must also be advised of the action taken. The case should be kept open and reviewed at 4 weekly intervals and if it is still outstanding after 3 months form the date HMRC was notified, an interim report should be sent to HMRC, preferably by completing and dispatching Part 2 of Form VO 1103.
27.41 Parties fail to respond to notification
If no response is received from the parties within 15 working days of notification under para 27.36 above, a reminder preferably on Form VO 1102 (Appendix 12) should be sent.
If no reply is received to this reminder within 10 working days, the caseworker should immediately advise HMRC, preferably by completing and dispatching Part 2 of Form VO 1103 (see para 27.19 above), giving the dates of dispatch of both VO 1101 and VO 1102 and completing sub-paragraph 2g).
27.42 Late response from the parties
Where the parties respond to the notification of value after HMRC has been contacted in accordance with para 27.41 above, the caseworker should immediately advise HMRC, either by email or by telephone and proceed in accordance with paras 27.37 - 40 above.
27.43 Interim reports
If any Valuation case is still outstanding after 60 working days from the date of receipt and the caseworker has not already contacted HMRC under any of the above paragraphs, the caseworker should advise HMRC of the current position (i.e. current opinions of value, likely negotiating position etc.) and giving the reasons for any delay. This contact should either be by telephone or by email, preferably completing Part 3 of Form VO 1103 (see para 27.19 above). N.B. If Form VO 1103 is used, the caseworker must ensure that the option referring to a Determination of Value is deleted.
Once negotiations have commenced, the caseworker should ensure they remain active and that there is contact with either the parties or their agents at no greater than 20 working day intervals.
It is important that the caseworker keeps HMRC advised of developments and, in particular, advises them of any changes in either the caseworker’s or the parties’ figures. This not only allows HMRC to monitor the tax at stake but also, in the case of a higher figure volunteered by the parties, gives them a chance to invite the parties to pay any additional tax which may be due on their revised figures, thereby mitigating any interest which may become payable later.
If, at any stage, HMRC advise that the tax at stake does not warrant the caseworker continuing with the case then the caseworker should report the case by completing Parts 1a) and 4 of Form VO 1110 (see paras 27.55 and 27.70 below) and Parts 2 and 3 where appropriate (see paras 27.61 and 27.68 below).
27.45 Negotiations dead-locked
If the parties or their agent fail to respond to correspondence from the caseworker or if the caseworker feels they are deliberately stalling, HMRC should immediately be advised of the position and a strategy agreed as to how to proceed.
If, on the other hand, it becomes clear that a genuine dead-lock in negotiations has been reached, the caseworker should request whether a determination of value is warranted, by completing Part 5 of Form VO 1103 (see para 27.19 above).
It must be remembered that, if HMRC decides that a determination is warranted, a full appeal report will be required (see para 27.47 below). Accordingly, when completing sub-paragraph 5i) of VO 1103, the caseworker must state any assumptions that have been made in arriving at the opinion of value and, if it is felt that there are any weaknesses in the caseworker’s case, these must be drawn to HMRC’s attention at this stage (see paras 27.48(4) and 27.49 below for further guidance on this). HMRC must also be advised at this stage if a point of principle is at stake (e.g. the discount to be applied in valuing an undivided share in accordance with Section 18).
In addition copies of the most recent exchange of correspondence must be attached and sub-paragraph 5j) should be endorsed accordingly.
HMRC’s response to the determination enquiry
Once HMRC has received an enquiry in accordance with para 27.45 above, they will decide whether a determination is warranted and then advise the caseworker (normally using Form VOA 4 - see para 27.19 above) that either:
a determination is warranted - (In this event the caseworker should proceed in accordance with para 27.47 below); or
the case is not worthy of pursuit - (In this event the caseworker should report by completing Parts 1a) and 4 of Form VO 1110 (see paras 27.55 and 27.70) and Parts 2 and 3 where appropriate (see paras 27.61 and 27.68); or
HMRC is making further enquiries - (In this event the caseworker should await specific instructions from HMRC and proceed accordingly).
27.47 Appeal Reports
Where HMRC has indicated that a determination is warranted, the caseworker must complete an Appeal Report within 20 working days.
Most Appeal Reports should be based on the format set out in Appendix 18. However, in cases involving claims for Agricultural Relief, the report should be based on the format set out in Appendix 19.
The caseworker should forward the completed Appeal Report together with the case file to their Sector Leader for signing. The Sector Leader should then proceed in accordance with para 27.48 below, before forwarding the report and file to CEO, for consideration in accordance with para 27.49 below.
Where the issue of whether cottages, farm buildings or farmhouses qualify as “agricultural property” (see Section 9 Part 2) is in dispute, the Appeal Report should incorporate the consideration of the character appropriate tests described in PN10.
Caseworkers should be aware that once an appeal report has been endorsed by CEO and passed to HMRC, in accordance with para 27.49, HMRC will then consider issuing a Notice of Determination, which in turn may lead to an appeal to either the First-tier Tribunal (Tax) or Upper Tier (Lands Chamber) (see para 27.54 below). Accordingly, they should ensure that they have all material, which they would need to prepare an expert’s report, available to them, or, if not, such material is capable of being obtained within a short time frame. If it is envisaged that difficulties are likely to be encountered in obtaining this supporting information, this should be made clear in the Appeal Report.
27.48 Personal satisfaction of Sector Leader as to status
In all disputed cases the Sector Leader (or report’s signatory) should personally review the matter to ensure that:-
The approach to the valuation is correct in principle and law (after obtaining appropriate advice as necessary);
The available evidence, whether by way of transactions or other sources (subject to any necessary consents being forthcoming), adequately supports the Opinion of Value, any known evidence which could discredit the valuation being sufficiently outweighed by favourable evidence;
If evidence is scant or non-existent, so that the valuation is largely or wholly unsupported, the Opinion of Value is a logical and reasonable one having regard to all the circumstances. The availability of any evidence which could discredit the Opinion of Value, whether or not such evidence is known to the taxpayer, would have particular significance in such circumstances;
If, despite the endeavours of HMRC and the caseworker, it has proved impossible to obtain factual information, or factual information is in doubt (see para 27.22 above), that the assumptions behind the valuation are reasonable even though they favour HMRC. If in the event of those assumptions proving incorrect there would be a substantial variation in the Opinion of Value, attention should be drawn to this in the submission.
If the Sector Leader is not satisfied that the case falls within sub-paras (1)-(4) above, the valuation must be reconsidered as a matter of urgency. Any revised Opinion of Value should immediately be notified to the taxpayer and HMRC advised accordingly. The caseworker should then await the parties’ response to see if the matter can be settled by agreement.
If the parties fail to agree or fail to respond to this notification within 25 working days (viz. following a reminder sent after 15 working days), the caseworker must resubmit part 5 of VO 1103 to HMRC. The caseworker should then proceed in accordance with para 27.46 above.
Wherever possible, the report’s signatory should not be the caseworker.
Review by CEO
On receipt of the appeal report and case file, CEO will review the case with a view to placing it in one of the following categories:
- The figure is fully defendable, i.e. CEO is satisfied that there is sufficient evidence to support the opinion and there are good chances of a favourable outcome if there were to be an appeal to either the First-tier Tribunal (Tax) or Upper Tier (Lands Chamber)..
- The figure is defendable and there is sufficient evidence to support the opinion, i.e. CEO is satisfied that there is sufficient evidence to support the opinion based on the information available. However, the caseworker has been required to make assumptions and/or information is lacking.
- The figure is defendable but there is a lack of supporting evidence or there are serious doubts whether a favourable outcome will be obtained before the either the First-tier Tribunal (Tax) or Upper Tier (Lands Chamber).
- There is insufficient detail at present to form a view as to whether the opinion is defendable and the caseworker is required to undertake further research.
- The figure is not defendable.
CEO will notify both HMRC and the caseworker of the category into which the case has been put and will return the case file to the caseworker within 10 working days of receipt of the report.
In cases classified as falling within categories a, b, c and e), CEO will forward the report to HMRC and the caseworker should proceed in accordance with Part 3 below.
In cases classified as falling within category d), CEO will return the papers to the Sector Leader with specific instructions as to how to proceed.
27.50 Case review
If a case is still outstanding after 120 working days from the date of receipt, HMRC are required to conduct a case review. The caseworker should initiate the review by completing Part 4 of Form VO 1103 (see para 27.19 above), setting out the current position in respect of the case and specifying: the respective current valuations, the current status of negotiations, an assessment of the strength of the case (see para 27.49 above for guidance), the “bottom line” figure at which a settlement could be recommended and any necessary factual information that is in doubt or has not been made available.
HMRC will then review the case and will advise the caseworker either:
- to proceed with negotiations, in accordance with an agreed strategy and timetable (which might include a letter direct to the parties from HMRC; or
- prepare an Appeal report, in which case the caseworker should proceed in accordance with para 27.47 above; or
- that the case is not worthy of pursuit, in which case the caseworker should proceed in accordance with para 27.46b) above; or
- that HMRC is pursuing a tax settlement, in which case, if successful, HMRC will subsequently advise the caseworker accordingly and the caseworker should then proceed in accordance with para 27.46b) above. If a tax settlement is not achieved HMRC will advise the caseworker as to how to proceed.
Part 3 : Notices of Determination
27.53 Subsequent action by HMRC(IHT)
Following receipt of an Appeal Report from CEO (DVS) (see 27.49 above), HMRC(IHT) may carry out further investigations or seek to obtain further information from the parties and may subsequently decide that there is some merit in investigating whether it is still possible to reach a negotiated settlement and request the DV to re-open negotiations. In these circumstances the DV must ensure that negotiations are actively pursued and that the HMRC(IHT) caseworker is kept aware of all developments.
Alternatively HMRC(IHT) may well decide to explore the possibilities of reaching a settlement on taxation grounds and, if successful, they will advise the DV accordingly. The case should then be reported in accordance with 27.46b) above.
If it proves impossible to reach a settlement, HMRC(IHT) will serve a Notice of Determination (NOD) on the parties under s.221 IHTA 1984.
27.54 Appeals against a Notice of Determination
The parties have 30 days within which to appeal against a NOD.
If no appeal is received, the value or issue, is then settled and HMRC(IHT) will proceed to the next appropriate step with the parties. HMRC(IHT) will advise the DV, via CEO (DVS), of the outcome. The file can then be closed.
If an appeal is received, the details will normally be passed on to the Revenue Solicitor so that a reference can be made to either the Lands Tribunal (in disputes concerning the value of land and buildings) or the Special Commissioners (in other cases). When the papers are passed to the solicitor, HMRC(IHT) will advise CEO (DVS) who, in turn, will advise the DV, who should then proceed in accordance with Section 37.
Part 4 : Final Reports
27.55 Form VO 1110
Once agreement has been reached in respect of a Valuation case, a final report should be issued on Form VO 1110 (Appendix 14).
N.B Depending on the requirements of the case, VO 1110 requires the DV to select from a number of different options. In order to safeguard against possible confusion in HMRC(IHT), it is important that all unused options are deleted from the final report.
When issuing a final report, the DV should, in the vast majority of cases, follow the procedures outlined in 27.56 - 70 below. However, there will be a few cases which do not fit easily into these procedures and these are considered in more detail at 27.72 - 27.75 below.
Form VO 1110 is a Microsoft “Word” template and, after the deceased’s details have been entered, the DV is required to complete a number of standard paragraphs.
The paragraphs to be used will vary depending on the circumstances of the case but either Part 1a or Part 1b of the form must be completed in all cases. In determining whether Part 1a or Part 1b should be completed the DV should proceed as follows:
Part 1a should be completed in all cases where:
- valuations are agreed; or
- returned figures are accepted by the DV.
Part 1b should be completed in all cases where values have not been finally agreed but the DV considers that the case should be closed for one of the reasons set out in sub-paragraphs x - xii of VO 1110.
Part 1a) of Form VO 1110
The circumstances where Part 1a should be completed are described at 27.55 above. Part 1a comprises the following:
- Opinion of Value - this must be completed in all cases (see 27.57 below).
- Supplementary endorsements - these are to be completed where appropriate (see 27.58 below).
- Endorsement regarding negotiations - this is to be completed where appropriate (see 27.59 below).
27.57 Opinion of Value
This must be completed in all cases and endorsed with either sub-paragraph i) or sub-paragraph ii) as appropriate.
Where sub-paragraph i) is completed, the ‘Returned’ value should be taken as being either the value returned by the parties or the value inserted on D12 or its equivalent by HMRC(IHT). In the latter case, the HMRC(IHT) caseworker will have added or amended the figure in red ink and initialled the alteration on behalf of the Director.
Sub-paragraph ii) should be completed where either no valuation has been returned by the parties or a valuation has been returned in respect of a different valuation unit (e.g. where the DV is reporting a valuation of an undivided share and the parties have returned a valuation of the entirety). In such cases the DV should also clearly identify the valuation unit that he or she has adopted (e.g. half share)
27.58 Supplementary endorsements
In certain circumstances, the DV will also be required to complete 1 or more of the Supplementary Endorsements (sub-paragraphs iii) - vi)), namely:
iii) “and the value of qualifying trees and underwood growing on the land has been excluded” (see Section 10 para 10.30)
iv) “and that the value attributable to the relevant business property is £*” (see Section 11 para 11.49)
v) “and that the value apportioned to that part of the property which is used exclusively for business purposes is £*” (see Section 11 para 11.49)
vi) “and that the value transferred excluding the value of the insurance policy/right of action is £*” (see Section 7 para 7.35).
If, in multi-property cases, the endorsement does not apply to all the items in the DV unit area, the item numbers (using the numbering adopted on Form D12 or its equivalent) to which it applies must be stated.
27.59 Endorsement regarding negotiations
In all cases where values have been agreed, the DV must complete sub-paragraph vii) stating the name and address of the person or firm with whom they have been agreed. DVs are reminded that all agreements must be in writing (see 27.37 above).
Part 1b) of Form VO 1110
27.60 Completion of Part 1b
The circumstances where Part 1b should be completed are described at 27.55 above. When completing this part, the DV must also give a reason as to why the case has been closed by completing one or more of sub-paragraphs x - xii, namely:
x) “because the value transferred does not exceed the tax threshold”. (This should be used in death cases only - see 27.35 above)
xi) “because 100% Agricultural Relief is available in respect of the whole property and there is no difference between the agricultural value and the market value” (see Section 9 para 9.78)
xii) “because 100% Business Relief is available in respect of the whole property”.
Part 2) of Form VO 1110
27.61 When to complete Part 2
Part 2 must be completed in all cases where tax is payable, an opinion of value has been arrived at in accordance with 27.35 above and one of the following circumstances is satisfied:
- where Form D12 (or equivalent) contains more than one item situated in a single DV unit area
- where Form D12 (or equivalent) contains only one item situated in a single DV unit area which has been split for valuation purposes (see Section 25 para 25.6)
- in all Lifetime transfer cases where the “value transferred” differs from the “value of the property” transferred (see 27.63 below)
- in all cases involving agricultural property (see 27.66 below).
27.62 Completion of Part 2
When completing Part 2, the DV must provide the following information:
- The Item Number of each property valued as it appears on Form D12 or its equivalent.
- The address of the property or sufficient detail for it to be identified.
- Where agricultural property is involved, the DV’s opinion of the agricultural value of each item (see 27.66 below). In multi-property cases, all reported values must be totalled at the bottom of the column.
- The DV’s opinion of the open market value of each item (see 27.63 - 27.66 below for special circumstances). In multi-property cases, all reported values must be totalled at the bottom of the column.
27.63 Lifetime transfers
In lifetime transfer cases, where the “value transferred” of an item differs from the “value of the property” transferred (see Section 4 para 4.16) and where HMRC(IHT) has not requested “before” and “after” valuations in accordance with Section 4 para 4.19, VO 1110 should be completed as follows:
- The value transferred should be inserted in the cumulative total in the “Opinion” at Part 1a) (where appropriate).
- The value of the property transferred should be inserted in Part 2 and the item should be endorsed “The value of the property transferred”.
Where HMRC(IHT) has requested “before” and “after” values, the Final Report should be modified in accordance with 27.75 below.
27.64 Grouping and splitting
Where items returned by the parties have been either grouped or split for valuation purposes, the report should be marked in accordance with Section 25 para 25.6.
27.65 Multi-property cases where some items attract 100% Business Relief
In cases where the DV is required to complete Part 2) of VO 1110 and some items have not been valued because they attract 100% Business Relief, those items should be endorsed “100% Business Relief claimed”.
For cases involving agricultural property where 100% Business Relief is claimed, see 27.66 below.
27.66 Agricultural property
For cases involving agricultural property (see Section 9), the DV should proceed as follows:
- 100% Agricultural relief cases where open market values and agricultural values are equal
Where the whole estate attracts 100% Agricultural Relief there is no need to report an opinion of value and Part 1b)xi of VO 1110 should be completed.
Part 2 of VO 1110 should be endorsed “100% Agricultural Relief claimed”. 2. Multi-property cases where only some items attract 100% Agricultural Relief and whose open market values and agricultural values are equal
Where Part 1a) is required to be completed (see 27.55) and only part of the estate comprises items, or parts of items, where the values are equal and 100% Agricultural Relief is appropriate, the value of these items, or parts of items are to be excluded from the reported values.
When completing Part 2, the relevant items, or parts of items, should be endorsed “100% Agricultural Relief claimed”. 3. 100% Business Relief cases comprising agricultural property where open market values exceed agricultural values
Where the whole estate attracts 100% Business Relief there is no need to report an opinion of value and Part 1b)xii of VO 1110 should be completed.
Part 2 of VO 1110 should be endorsed “100% Business Relief claimed”. 4. Multi-property cases where some items of agricultural property attract 100% Business Relief and their open market values exceed agricultural values
Where Part 1a) is required to be completed (see 27.55) and only part of the estate comprises items where the values are equal and 100% Business Relief is appropriate, the value of these items are to be excluded from the reported values.
When completing Part 2, the relevant items, or parts of items, should be endorsed “100% Business Relief claimed”. 5. As for 4 above but in addition some other items of agricultural property attract 100% Agricultural Relief and their open market values and agricultural values are equal
Where Part 1a) is required to be completed (see 27.55) and certain parts of the estate comprises items where 100% Business Relief is appropriate, and certain other parts comprise agricultural property where the values are equal and Agricultural Relief is appropriate, the values of all these items are to be excluded from the reported values.
When completing Part 2, the relevant items, or parts of items, should be endorsed “100% Business Relief claimed” or “100% Agricultural Relief claimed”, as appropriate. 6. Other cases
Where Part 1a) is required to be completed, the market value of the whole estate is to be reported.
Part 2 should be completed showing both the open market values and the agricultural values.
27.67 Endorsement regarding negotiations
In multi-property cases where Part 1b) has been completed and values have only been agreed in respect of some of the items, the DV must complete sub-paragraph xiii), specifying which items have been agreed and stating the name and address of the person or firm with whom they have been agreed. DVs are reminded that all agreements must be in writing (see 27.37).
NB. There is no need to complete this sub-paragraph in cases where Part 1a) and sub-paragraph vii) have been completed.
Part 3) VO 1110 - Sales
The importance of notifying HMRC(IHT) of any sales is referred to at 27.9 above. Therefore, when issuing the Final Report the DV must complete Part 3 in respect of any items (or parts of items) that are known to have sold.
27.69 Sale at a price lower than the reported value
If the sale price of any item is lower than the reported value, the DV should proceed in accordance with Section 12 para 12.74.
If the DV is unaware of any changes affecting the item, sub-paragraph xiv) should be completed.
If the DV is aware of any changes a note should be appended in respect of that item.
Part 4) VO 1110 - Contact with parties
To avoid any confusion, the DV must notify HMRC(IHT) as to whether the parties have been advised that the papers have been returned by completing Part 4).
In multi-property cases, it is preferable that, whenever possible, the value of individual items should be accepted or agreed, since a value determined for IHT purposes may subsequently be used as evidence to establish the value of those items for other purposes (e.g. the value on death may establish the acquisition cost for CGT purposes – see CGT Manual para 6.137 et seq). However, there will be occasions where the DV is able to accept or agree an aggregate value of several properties without prejudice to the value of any individual property comprised therein and discretion is given to report accordingly.
Aggregate values should not be accepted or agreed in cases involving agricultural, business, falls-in-value or similar reliefs nor where woodland is involved.
Whilst HMRC(IHT) are prepared to accept an Opinion of Value agreed in aggregate without prejudice to the value of individual items they are not prepared, in conveying the Commissioner’s determination, to inform the parties to that effect. Accordingly the parties must be informed in writing of this condition under which the aggregate value is agreed when reporting a case “as returned”, or in confirmation of a negotiated valuation agreed in aggregate.
In such circumstances, when completing Part 2), the DV should show only the total value for those items which are being reported in aggregate.
When completing Part 4), the DV must complete sub-paragraph xv) and, if the values of only some items have been so agreed, identify those items whose values have been agreed in aggregate.
27.72 Cases involving Related Property
The procedure for dealing with cases involving related property can be found in Section 15. In such cases HMRC(IHT) will require a valuation of both the transferor’s property and its aggregate value with any related property. In such circumstances, the DV should substitute one of the following alternatives for the Opinion if required to complete Part 1a) of VO 1110:
Where the valuation rule applies (see Section 15 para 15.19)
“I am of the opinion that the aggregate value of the transferor’s property and the related property at the date of transfer is £* As returned/Returned at £ Increase/Decrease £*
and that the value of the transferor’s property if not part of the aggregate, at that date is £* As returned/Returned at £ Increase/Decrease £*”
Where the valuation rule does not apply (see Section 15 para 15.17)
“I am of the opinion that the aggregate value of the transferor’s property and the
related property at the date of transfer is £* As returned/Returned at £ Increase/Decrease £*
and that the related property valuation rule would not result in an increase in the value attributable to the transferor’s property, so it has not been applied”.
The remainder of VO 1110 should be completed in accordance with 27.60 et seq. above.
27.73 Lifetime transfer - falls in value cases
The procedure for dealing with lifetime transfer - falls in value cases can be found in Section 13. In such cases, the DV should substitute one of the following alternatives for the Opinion if required to complete Part 1a) of VO 1110:
Value at date of gift (see Section 13 para 13.20 & 13.21)
“I am of the opinion that the market value of the property transferred by the lifetime transfer at the date of that transfer is £*”
Value at relevant date, conditions unchanged (see Section 13 para 13.22)
“I am of the opinion that the market value of the property transferred by the lifetime transfer at the relevant date is £* On the basis that there have been no changes in the relevant conditions”
Value at relevant date, change in conditions (see Section 13 para 13.22)
“I am of the opinion that the market value of the property transferred by the lifetime transfer at the relevant date before adjustment for the changes in the relevant condition is £*”
The remainder of VO 1110 should be completed in accordance with 27.60 et seq. above.
27.74 SAV Cases
For the time being, formal references from SAV will continue to be made on Form Val 63A (see Appendix 5) and, when reporting such cases, the DV should follow the procedures set out in Section 16 Part 2.
There will be other cases where the DV deems the formal wording outlined at 27.56 et seq. to be inappropriate when reporting (e.g. when supplementary valuation advice is required). In such circumstances, the DV should adapt Part 1a) of VO 1110 accordingly.
27.76 Cases to be reported by email
All final reports to HMRC(IHT) should be sent by email.
Part 5 : Reconsideration of Opinions of Value
27.78 Effect of tax assessment following agreement
Once a case has been reported to HMRC(IHT) in accordance with the above (including cases where the DV has decided to “no question” a returned figure at the Informal Appraisal stage (see 27.10 above)), a final assessment of tax may follow and normally the valuation will not be open to further review, even though the parties offer to re-open the matter by, for example, filing a corrective account because a sale has taken place at a substantially higher figure. However, where the value reported was based on erroneous information or the parties claim a return of tax following the sale of the property for less than the value reported, a further review of the valuation may be permitted by HMRC(IHT) (but see 27.31 above).
27.79 DV wishes to re-open case
If after a case has been reported to HMRC(IHT), the DV discovers that the opinion was based on erroneous information, HMRC(IHT) should immediately be appraised of the facts. No contact should be made with the parties at this stage.
NB. The mere fact that a property has sold at a figure higher than the reported figure will not constitute grounds for re-opening a reference.
27.80 Parties contact DV direct
If, after a case has been reported to HMRC(IHT), the parties contact the DV direct seeking to negotiate, the DV should in no circumstances enter into discussion but should instead immediately relay the facts to HMRC(IHT) and advise the parties accordingly.
Especially in circumstances where no or reduced rate Inheritance Tax is payable, DVs should be aware of the fact that the parties may be eager to substitute a higher value for a previously returned or agreed valuation in order to establish a higher base value for any Capital Gains Tax which may become payable on a subsequent disposal (see Chapter 1A section 6 para 6.137 et seq.)
Referred back cases
Any request by HMRC(IHT) for the DV to reconsider a reported valuation should be treated as a Referred back reference and should be registered under the original reference, using the 03 Credit type. If, for any reason, the case cannot be re-registered under the original reference (e.g. because the case was previously reported using an 02 credit type), HMRC(IHT) should be advised of the new reference. Otherwise acknowledgements are not required.
27.82 Distinction between claims for fall-in-value and the reconsideration of an Opinion of Value following a sale
It is important to distinguish cases where parties are claiming that the reported figure was incorrect as evidenced by the subsequent sale from those where they are claiming “fall in value” or the s176 IHTA 1984 reliefs as described in Section 12. In the latter cases the parties are claiming in respect of sales within 3 or 4 years after a death that, at the date of sale, the value of the property was lower than at the date of death, whereas in the former the question to be considered is whether the subsequent sale price is sufficiently strong evidence to show that the reported valuation at the date of transfer requires revision.
Reconsideration after sale
27.83 General valuation factors
In the event of being requested to reconsider a valuation in the light of a subsequent sale, the DV should not feel bound either to maintain the original Opinion of Value or to adopt the sale price. The aim should be to arrive at the value as at the date of transfer having regard to the latest evidence available, but if the sale is at arm’s length, a price realised in the open market should be regarded as substantial evidence of the value of the property transferred provided that there has been no change between the date of transfer and the date of sale in:-
- the open market value for the type of property concerned; or
- any other circumstances which would affect the value of the property.
27.84 Deaths on or after 18 March 1986
If changes have taken place between the date of transfer and the date of sale it should be borne in mind that if a valid claim for fall-in-value relief is made the DV will then have to consider what adjustments, if any, should be made to the sale price realised for any properties (sold by the “appropriate person” within the appropriate period) to take account of certain specified changes (see Section 12: para 12.27 et seq). This aspect of the matter should not be discussed with the parties or their representatives unless already dealing with a claim for fall-in-value relief. At this stage the DV will simply be considering what weight, if any, should be given to a subsequent sale as evidence of the value as at the date of death.
Once agreement has been reached in respect of a referred back case or HMRC(IHT) has advised the DV that no further action is required, the DV should issue a fresh final report on Form VO 1110 and follow the procedure set out in Part 4 above.