HMRC internal manual

Inheritance Tax Manual

Improving future compliance: valuations of land

When you investigate an undervaluation of land or buildings you should consider whether it is appropriate to offer the agents any advice on the following lines to help ensure future compliance.

‘IHTA 1984 S.216 requires personal representatives to make the fullest enquiries reasonably practicable in order to be able to complete and deliver an account of the estate to HMRC specifying to the best of their knowledge and belief all appropriate property in the estate and the value of that property. The value of property in accordance with IHTA 1984 S.160 is the price the property might reasonably be expected to fetch if sold on the open market at that time.

If an estate includes land or buildings, then unless the personal representatives are easily able to determine the market value themselves, it is entirely appropriate for them to obtain a professional opinion of value or indeed more than one if they feel it necessary. Where professional values are obtained we expect

  • personal representatives to pass on to the professional valuer any pertinent information about the property that they discovered through their enquiries or as a result of personal knowledge which the valuer ought to be aware of
  • personal representatives to ensure the valuer is properly instructed to provide an open market valuation in accordance with s.160 of the Inheritance Tax Act 1984 (all valuations for inheritance tax carried out by members of the Royal Institute of Chartered Surveyors should now normally be carried out on the basis set out in ‘Guidance Note 21 of their Appraisal & Valuation Manual with effect from 1st August 2002)’
  • the valuer to consider whether there is any potential for development and if so to ensure that it is taken into account and reflected in the valuation (‘Hope’ value is a component part of the open market value in appropriate cases, whether or not planning permission has been sought or granted)
  • personal representatives to question valuation advice which does not on the face of it meet these requirements.

We also consider it reasonable to expect that the value of any asset finally included in the IHT400 is a realistic one that takes into account all the information available to the personal representatives prior to signing and submitting the IHT400 .

In other words having first obtained a valuation or opinions of value, given entirely in good faith, they may subsequently become aware of further (marketing) information which casts doubt on whether the original valuations still properly reflect the open market value of the property at the date of death. If personal representatives are aware of such information we consider it is reasonable to expect them to ensure it is properly considered and reflected appropriately in the final valuation figure included in the account.’