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HMRC internal manual

Inheritance Tax Manual

The District Valuer: Role of the District Valuer

The role of the DV is to agree the agricultural value (IHTM24150) and in cases where, the property has value for development or value for other non agricultural uses or there is an attractive farmhouse in a location that would appeal to non-farming purchasers the DV will also agree an open market value for the property.

As described in IHTM24161, the DV can provide informal advice on occupation for the purposes of agriculture (IHTM24070). If by inspection, local knowledge, or on the basis of information provided by the parties, the DV has doubts as to whether or not part, or the whole, of the property was occupied for the purposes of agriculture (IHTM24070), the DV will let you know immediately and await further instructions. This scenario is most likely to occur in the context of barns and other farm buildings, where the information provided by the parties suggests that there has been an agricultural element to the occupation but inspection suggests no recent use.

The DV will also let you know if there is any information that casts doubt on the rate (IHTM24140) of AR deducted by the taxpayers or their agents or the availability of business relief (IHTM25131).

If all the property on which AR has been claimed qualifies as agricultural property (IHTM24030) the DV will proceed to consider any valuations required. If the DV considers that any property on which AR has been claimed does not qualify as agricultural property (IHTM24030) then an Interim (IHTM24164) AR Report will be sent to you.

The interim report will contain the following details.

  • The identity of any doubtful property
  • The DV’s opinion of Agricultural Value and Market Value
  • Brief reasons for any doubts about eligibility: where ’character appropriate’ is the issue, an indication of extent of ineligibility For instance a farmhouse is not ’appropriate’ to a holding of 150 hectares, but would/might be to one of 250 hectares
  • Any assumptions the DV has made in arriving at the initial view. This should include confirmation of the size of the holding on which the view is based
  • Any other factors that the DV considers are relevant to eligibility
  • The DV will attach any descriptive valuation material obtained directly from taxpayer or agent that we are unlikely to have seen
  • Photographs of the items of property concerned.

Any further action by the DV on either the question of whether the property qualifies as agricultural property (IHTM24030) or considering the agricultural value (IHTM24150) of any disputed properties will depend on the further instructions from the caseworker or Technical under IHTM24164.

Development value and other non agricultural uses

Where qualifying agricultural property has an open market value in excess of its agricultural value under IHTA84/S115 (3) (for example, if the whole or part of it has hope value arising out of development potential or change of use) such excess value will not attract agricultural relief. As the excess value may attract business relief (IHTM25121) the DV will rely on your instructions. It is pointless for the DV to endeavour to agree an agricultural value if business relief at the higher rate is available. If relevant instructions have not been supplied, and the DV suspects that business relief may be applicable, full details will be provided and the DV will await new instructions from you before proceeding further.

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Residential value of farmhouses

Attractive farmhouses in locations near towns may appeal to non-farming purchasers and may therefore have a market value above their agricultural value. The DV will have this in mind in appropriate cases and will report accordingly. Remember that business relief will not normally apply in respect of the residential premium (IHTM24151) over and above the agricultural value of farmhouses.

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Farm Cottages

IHTA84/S169 (1) contains a special valuation rule for farm cottages occupied by persons employed solely for agricultural purposes in connection with the property. When valuing such cottages no account is taken of any value attributable to the fact that the cottages are suitable as residences for persons not so employed.

IHTA84/S169 (1) restricts the definition of open market value as defined at IHTA84/S160. It does not apply to agricultural value as defined at IHTA84/S115 (3).

The DV will determine the open market value as restricted by IHTA84/S169 (1) and the agricultural value of farm cottages that are occupied and qualify as agricultural property within IHTA84/S115 (2).

For the purposes of the Extra Statutory Concession F16 (ESCF16), dated 13 February 1995, IHTA84/S169 (1) may be deemed to be satisfied in respect of cottages occupied by retired farm employees or their surviving spouses or civil partners (IHTM11032). A rigorous interpretation of the ESC as regards the character appropriate test in IHTA84/S115 (2) may defeat its purpose and therefore the DV will only apply this test to cottages within the ESC when the following circumstances apply

  • there is some physical characteristic of the cottages such as size that makes them inappropriate for occupation by farm employees,
  • there are more cottages occupied by retired farm employees than by active farm employees,
  • if it appears that when the retired farm employees were employed it was on land that was no longer in the deceased’s/transferor’s estate at the date of transfer.

The DV’s instructions are that if any of these particular circumstances apply they should seek advice from the Chief Executive’s Office before they communicate any view to the parties.