Inheritance Tax Manual

Section 31: prior agreement

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

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General

31.1 Authority for death cases only

If requested by the parties and subject to the exceptions set out in para 31.5 below, the VOA is authorised to discuss informally the value of property transferred on death prior to the delivery of the IHT account.

31.2 Not to be given priority

Requests for prior agreement should be dealt with as expeditiously as possible but should not be given priority. It should also be noted that a charge can only be made for such casework when a formal reference is received from HMRC(IHT).

31.3 Parties’ obligations not affected

Requesting prior agreement does not relieve the parties of their statutory obligation to deliver the IHT accounts to HMRC(IHT) at the proper time, whether the values are agreed by that date or not.

31.4 Negotiation restricted to the valuation of property

No advice must be offered nor discussions entered into concerning liability for IHT, exemptions from tax, or any other matter not directly related to the valuation of property transferred. Should the parties request such advice or discussion they should be referred to HMRC(IHT).

31.5 Cases where values are not to be prior agreed

Requests for prior agreement should not be entertained in any of the following circumstances:

  • where the transfer arises other than on a death;
  • where the parties indicate that the cumulative total of the deceased’s property (including any lifetime chargeable transfers) is less than the tax threshold operative at the date of death;
  • where the parties indicate an intention to place the property on the market for sale;
  • where the value of the property is highly speculative;
  • where the property was occupied by a partnership that terminated on the death of the deceased;
  • where the property transferred consists of an interest in a company; but the value of real and leasehold property owned by the company may be prior agreed provided the concurrence of SAV is first obtained;
  • where the parties indicate an intention to claim agricultural or woodlands relief;
  • where the parties request agreement of the value specifically attributable to “relevant business property” (see Section 11);
  • where it is known that the “related property” valuation provisions of s.161 IHTA 1984 apply;
  • where an undivided share is transferred and another share in the same property also forms part of the deceased’s estate (e.g.. one share is held as free estate and another as settled property, or another share is “related property”);
  • where the parties request agreement of valuations for “falls-in-value” or similar reliefs (see Sections 12 and 13);
  • where the parties request agreement of valuations for spouse or civil partner taxed cases (see Section 14); ◦ where it is known that the disposition on death is likely to be an exempt transfer (e.g. to a surviving spouse or civil partner).

In all cases where a request for prior agreement is declined, the parties should, at the same time, be advised to deliver their account or make their claim for relief to HMRC(IHT).

31.6-9 Reserved

Use of Form VO 1140

31.10 Conditions for prior agreement

The reverse side of Form VO 1140 (see Appendix 15) sets out the conditions under which prior agreements may be made and all applicants must be aware of these conditions. Where the request is by letter, provided it is not apparent at the outset that prior agreement is precluded under 31.5 above, Form VO 1140 should be sent to acknowledge the request. If the request is by personal application the form should be given to the applicant and the file noted accordingly.

31.11 Query as to sale

Also on Form VO 1140 the parties are asked to state whether it is intended to put the property on the market for sale and it should be ensured that there is no such intention before entering into negotiations.

31.12 Parties to furnish details in writing

To avoid agreement based on incomplete or inaccurate information the parties should be requested, using Form VO 1140 where appropriate, to furnish in writing, either at the interview or by letter in advance, a sufficient description of the property with its tenure, rentals, outgoings, charges, etc together with the name of the deceased, the date of death and their estimate of value.

31.13 Parties to furnish estimates of value

The parties are not to be relieved of their liability to furnish their estimate of value of the property concerned.

31.14 Liaison between DVs

Form VO 1140 asks the parties if they have approached any other DVs to discuss the value of other property in the estate. In order to ensure uniformity where other DVs are involved, there should be consultation between DVs, if necessary, before agreement is concluded.

31.15 Reserved

Large estates, grouping of items for valuation

31.16 General

Applicants may submit separate values for items of property, which would normally be lotted differently by a prudent vendor offering the estate for sale in the open market. In these circumstances such lotting as would be most likely to achieve the best price reasonably obtainable for the estate as a whole should be adopted and agreed.

31.17 Leaseholds

A separate value or values must be placed on any leasehold property.

31.18 No prior agreement of a valuation in aggregate

Where a number of unconnected properties, which would not realise an enhanced price if offered for sale together or in combined lots, are submitted for prior agreement, separate values should always be agreed for each property. If this is not possible, an offer to agree an aggregate value for all the properties without prejudice to the value of any individual property should not be made.

31.19-24 Reserved

Negotiations

31.25 Negotiations not to be protracted

Although a matter for discretion, negotiations should not be unduly protracted and should normally be broken off if agreement is not possible for a full exchange of views.

31.26 Failure to prior agree

If a prior agreement cannot be reached in respect of any property the applicants should be advised to file their IHT account without delay with HMRC(IHT).

31.27-99 Reserved