Inheritance Tax: VAL70 (Settlements)
For convenience, the term ‘relevant property trust’ is used to cover all settlements in which either no beneficial interest in possession subsists or in which a beneficial interest in possession arising on or after 22 March 2006 is not ‘qualifying’ for IHT purposes - see the Inheritance Tax manual at IHTM16061 onwards for guidance.
Section 1 details the shares subject to the present charge. The particulars given and the valuation requirements will, however, depend on the relevant tax claim (as identified in Section 4).
In the case of a ten-year anniversary charge only Section 1 is completed. The Section will show all the shares subject to the relevant property trust at the date of the charge and the value of these shares is required on the day before the date of the charge. See also this chapter SVM108060 - the VAL72 and Risk Assessment for Ten Year Anniversary Charge.
If you are satisfied that 100% BR/AR applies to the shares in Section 1, you can report accordingly and take no further action, even if Section 3 is also completed.
In the case of proportionate charges, Section 1 will show the shares leaving the relevant property trust at the date of the charge. Tax is charged on the ‘loss to the trust’ and valuation is required of all the shares subject to the relevant property trust immediately before the event and also of any retained shares immediately afterwards (see Section 2).
Section 2 applies only to proportionate charges and special trust charges and gives details of any retained shares after the event. This is for the purpose of calculating the ‘loss to the trust’. To establish the pre-event total of shares, the shares in this section must be added to those in Section 1.
Staff in Non-Death Compliance Teams are instructed to obtain full details of any retained shares from the agents prior to completing the Val 70; and if they learn that there are none, they should write ‘None’ in the section. SAV need not check or question the details given, unless information obtained during the normal course of negotiations casts doubts on their accuracy.
Section 3 is only completed in the case of proportionate charges arising on a transfer out of a trust before the settlement’s first ten-year anniversary (s.68 proportionate charges). If Section 3 is completed and 100% BR/AR is not due on the shares and so on in Section 1, the valuation is a two-stage process. Firstly, we have to consider the value of the shares transferred into the settlement at the time of that transfer (Section 3). For this purpose, we value the shares in isolation, ignoring any shares retained by the settlor or related property.
If you consider that the value of the shares and so on shown at 3(a) does not exceed the figure shown at 3(b), you should advise Compliance Group accordingly and not proceed to the valuation at Section 1. Where the value of the shares at 3(a) exceeds the figure at 3(b), SAV will (subject to risk assessment criteria) need to agree values both for the shares at Section 3 (to establish the rate of tax) and those at Section 1, which are subject to the present charge. BR/AR/Instalments, may, of course, be relevant to the shares and so on itemised in Section 1. [As indicated above, you will only need to consider the Section 3 valuation at all, if 100% BR/AR does not apply to the shares in Section 1.]
If Section 3 shows the (a) figure as not exceeding the (b) figure, the provisional rate of tax will be nil. If SAV’s opinion of value causes the 3(b) figure to be exceeded, you should refer back to Non-Death Compliance Group for an indication of the rate of tax chargeable on the basis of your figures. Even where the parties’ figure at (a) is in excess of (b), a substantial increase in value will increase the rate of tax, so if you consider the shares at 3 to have a much greater value than was originally returned, check with the IHT caseworker as to the effect agreeing your value would have on the rate of tax.
Section 4 indicates how the claim for tax arises.
Section 5 applies as for Section 4 of the Val 70 (Lifetime). See this chapter SVM108030.
For the purposes of the two reliefs in relevant property trust cases, however, the statutory references to the ‘transferor’ include references to the trustees of a relevant property trust.
Section 6 shows the appropriate tax rates based on the agents’ values for the taxable property. These are given simply as a guide to help share valuers when considering how far a case is worth pursuit.
Sections 7 - 9 will contain any other information relevant to the share valuation included in the IHT Account or Compliance Group file.
|Additional Guidance: SVM150000|