Section 2: Property Valuation Process
The Valuation Office Agency's (VOA) technical manual relating to Inheritance Tax.
Inheritance Tax (IHT) is the responsibility of HMRC. In matters involving the valuation of land and buildings they will seek specialist advice from the Valuation Office Agency (VOA), an executive agency of HMRC.
The decision to refer any particular property valuation case to the VOA lies with HMRC. Where they do, HMRC will firstly ask the VOA to ‘informally’ consider the valuation returned on the IHT account by the executor, to assess whether it is fair and reasonable. ‘Informally’ means considering the valuation in relation to any information provided by HMRC and the data the VOA already hold, for instance survey details and sale prices of the property itself, or those of a similar character and location sold around the same time as the date of death. The VOA will also rely on data it holds for its other statutory purposes, such as that used in its assessment of properties for Council Tax. In most cases the valuation returned is accepted and the executor is unaware that the process has taken place.
In some cases, the VOA will be unable to accept at this informal stage that the valuation returned represents the true market value based on the details available. It may be necessary to clarify some factual information about the nature of the property or the legal interest. At this stage an inspection of the property may be required. This does not mean anything is wrong, simply that more information is needed to reach a conclusion. The executor or an agent acting on their behalf may be asked to provide additional information at this stage to support the valuation returned.
If, having obtained the necessary information, the VOA valuer is of the opinion that a different valuation is appropriate to that returned, they will seek to agree the value with executor or their agent.
In most cases the valuation will be agreed, but if this is not possible the VOA will report to HMRC who will decide on the next steps.
If a valuation cannot be agreed it may be referred on appeal to the Upper Tribunal (Lands Chamber). If non-valuation issues (such as the extent of ‘agricultural property’) cannot be agreed the matter may be referred to the First Tier Tribunal (Tax Chamber) for determination. In either instance the VOA caseworker will be instructed to act as an ‘expert witness’ at any Tribunal hearing.
Caseworkers must ensure the contact is with the taxpayer’s representative named on Form IHT405, or its equivalent.
It should be noted that the person named on the IHT405 may sometimes 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
In death cases, all negotiations regarding value must be carried out with individuals who have been authorised to act by the deceased’s executors. If any other individual (such as a beneficiary) contacts the caseworker with a view to agreeing values, 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.
Paragraph 12A of Schedule 36 of the Finance Act 2008 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 specified taxes which include those in which the VOA is involved - Inheritance Tax, Capital Gains Tax, Corporation Tax in respects of chargeable gains, Stamp Duty Land Tax, and Annual Tax on Enveloped Dwellings. 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.
The Act defines “relevant person” as
(a) the occupier of the premises, or
(b) if the occupier cannot be identified or the premises are vacant, a person who controls the premises.
In most cases it will usually be possible to arrange an internal or onsite inspection for valuation purposes with the parties (or the current owner or occupier of a property) by agreement. It should however be noted that even when making the inspection by agreement, and confirming this in writing, the inspection involves the use of the statutory powers.
The Home Office ‘Code of Practice - Powers of Entry’ (December 2014) publication issued by the Secretary of State under Section 48 of the Protection of Freedoms Act 2012 requires the person exercising a power of entry, such as those under Paragraph 12A of Schedule 36 of the FA 2008, should make or have made a record of any exercise of powers of entry or associated powers.
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 be present on the next occasion.
In all cases the caseworker should produce their photo identity card.