CG74500 - Unagreed valuation

1. Introduction

This guidance covers the steps to be followed where the valuation of land provided by the Valuation Office Agency is not agreed.

It covers:-

• The remit of the Lands Tribunal,
• When valuation disputes are considered by the Lands Tribunal,
• Whether a case is appropriate to go to Lands Tribunal,
• The Lands Tribunal warning letter,
• Pre-closure approval of cases by CG Technical,
• Appeals and further referrals to CG Technical and Sols,
• The interaction of Tax Tribunal and Lands Tribunal.

1. Lands Tribunal

If the Valuation Office Agency cannot negotiate an agreement you will receive an unagreed valuation.

This valuation is the considered opinion of our professional adviser and you must not compromise it by trying to negotiate an agreement at a different value.

If agreement on a land valuation cannot be reached between the customer and the Valuation Office Agency, and the customer appeals to the Tribunal against the conclusion and amendment based on the valuation opinion of the Valuation Office Agency, it is the Lands Chamber of the Upper Tribunal (the Lands Tribunal) and not the First-tier Tribunal which resolves the issue.

The Lands Tribunal is a Chamber of the Upper Tribunal with the power to award costs, which may be substantial. If a reference to the Lands Tribunal is necessary we are represented by HMRC’s Solicitor’s Office if legal representation is considered necessary.

Capital Gains Technical Group are responsible for referring the valuation dispute to Solicitor’s Office to prepare for a reference to the Lands Tribunal.

But if the land valuation and the underlying tax treatment are disputed, the appeal may be to the First-tier Tribunal of the Tax Chamber, who may refer the land valuation dispute to the Lands Tribunal to determine. Once the land valuation dispute is determined, the First-tier Tribunal will be in a position to decide the disputed tax treatment, taking into account the outcome of the land valuation dispute.

For guidance on appeals, reviews and Tribunals see the Appeals Reviews and Tribunals guidance manual (ARTG).

Under the provisions of TMA70/S46D (1) the Lands Tribunal is the relevant tribunal for England and Wales and has the jurisdiction to determine the value of:-

• land, or
• a lease of land

where that value arises in any appeal in relation to:-

• Capital Gains Tax
• Corporation Tax on chargeable gains
• a claim under TCGA92.

The jurisdiction applies to:-

• an amendment of a self-assessment
• an amendment of a return
• a conclusion stated or amendment made by a closure notice
• an amendment of a partnership return
• an assessment to tax which is not a self-assessment;
• a conclusion stated or amendment made by a closure notice relating to a claim or election made otherwise than by being included in a return
• a decision contained in a closure notice disallowing in whole or in part a claim or election made otherwise than by being included in a return.

The Lands Tribunals for Scotland and the Lands Tribunal for Northern Ireland are the relevant tribunals with similar jurisdiction for land located in Scotland and Northern Ireland.

1. No tax effect

In some cases the valuation of land in dispute may have little or no effect. This may be the case where, for example, both the customer’s valuation and the Valuation Office Agency’s unagreed valuation give rise to gains which are below the annual exempt amount for that year and no other gains accrue to the customer in the same year; or because both valuations give rise to losses for a company which has subsequently been wound up and the losses will never be used.

In these cases you should:-

• write to the customer and explain that because there is no tax at stake on either valuation you will accept the returned gain or loss without prejudice to the valuation put forward by the Valuation Office Agency
• inform the Valuation Office Agency that the unagreed valuation has no possible tax effect, and that you are therefore accepting the customer’s computation without prejudice to the Valuation Office Agency’s valuation, so that their file can be closed.

If the valuation dispute does not currently have any effect on an appeal, as explained above, it will not be possible for that valuation dispute to be referred to the Lands Tribunal. This will also apply to any post transaction valuation check where it is not possible to reach agreement.

1. Current or future tax effect

When you receive an unagreed valuation and there is a tax effect either in a current year (or accounting period) or a future year (such as reducing a loss which would be effective in reducing a tax bill in a later year or accounting period) you should check that:-

• you have an open enquiry into a self assessment to Capital Gains Tax or to Corporation Tax on chargeable gains for the appropriate year or accounting period, or

• that you have an open enquiry into a claim under TCGA92,

and

• that the valuation is for the purpose of computing a chargeable gain or allowable loss and not, for example,

• a trading stock valuation

• a valuation on a transfer from a company to an employee at undervalue where CG16270 applies

• that there is no outstanding matter which will prevent any gain from being a chargeable gain, for example, private residence relief, see CG64200P.

If all of these conditions are fulfilled you should write to the customer or their agent in the terms outlined in Section 5 below and send a copy to the Valuation Office Agency.

1. Lands Tribunal warning letter

Land in England or Wales

If all of the conditions at Section 4 above are fulfilled you should write to the customer or their agent in the terms outlined below, amending the draft as required in the light of the circumstances of the particular case, and send a copy to the Valuation Office Agency.

“The Valuation Office Agency has reported to me that it has so far not proved possible to reach agreement about the value of [insert address] on [insert valuation date(s)].

Where agreement cannot be reached there is an independent tribunal, the Lands Tribunal, (the Lands Chamber of the Upper Tribunal) which has the power to determine valuations of land where that value arises in any appeal. My next action will be to consider whether to take the necessary steps to close the enquiry and issue an amendment, and to prepare as necessary in anticipation of a possible reference to the Lands Tribunal. Before I do so you may wish to consider whether it is still possible for you to reach agreement with the Valuation Office Agency. If so you should contact the VOA to resume negotiations.

As the Lands Tribunal is a Chamber of the Upper Tribunal if a reference to the Lands Tribunal is necessary, either directly by the customer, or by the First-tier Tribunal following an appeal by [you/your client] about the underlying tax treatment, then HMRC will be represented by the Board’s Solicitor. The Lands Tribunal also has the power to award costs.

You can find more information about the Lands Tribunal on their website at https://www.gov.uk/courts-tribunals/upper-tribunal-lands-chamber.

I have sent a copy of this letter to the Valuation Office Agency and will, for a short period, suspend further action.”

Land in Scotland or Northern Ireland

The Lands Tribunal Warning letter above refers to cases involving land in England and Wales. In cases involving land in Scotland and Northern Ireland the letter should be suitably redrafted and reference made to the information available from those tribunals as below.

Lands Tribunal for Scotland

Lands Tribunal for Northern Ireland

1. Further negotiations

The Valuation Office Agency will report back two months after the above Lands Tribunal warning letter was sent, advising whether or not meaningful negotiations have been resumed.

If meaningful negotiations have not been resumed the case should be carefully checked in anticipation of a possible reference to the Lands Tribunal by the customer, see Section 7 below.

If meaningful negotiations have been resumed the Valuation Office Agency will keep you informed of progress. In due course they will either report:-

• an agreed valuation enabling you to determine the appeal, or
• that it has still not been possible to agree a valuation, and give you his or her latest unagreed valuation.

If the Valuation Office Agency again reports an unagreed valuation the case should be carefully checked in anticipation of a possible reference to the Lands Tribunal, see CG74530. No formal action should be taken to close the enquiry, or to issue amendments etc, at this stage.

1. Caseworker actions prior to issue of a closure notice

In view of the cost and time which can be involved in preparing and referring cases to the Lands Tribunal it is important to ensure that any unresolved valuation dispute put forward is:-

• appropriate to the Lands Tribunal,

• working correctly from a technical point of view, and

• that all necessary preliminary steps have been taken.

All cases in which a valuation dispute cannot be resolved by negotiation between the Valuation Office Agency and the customer should therefore be thoroughly checked and approved by CG Technical before a closure notice is issued.

If cases have been worked completely in accordance with the guidance the check should not normally identify any problems, but it is nevertheless essential that it is thoroughly carried out.

The results are to be recorded and will be relied on by Capital Gains Technical Group when forwarding cases to the Solicitor for preparation for a possible reference to the Lands Tribunal.

Informal referral to CG Technical - Low tax at stake

Bearing in mind the costs involved in a reference to the Lands Tribunal, if you are of the opinion that the tax at stake in the valuation dispute may not justify a formal referral you should make a report to Capital Gains Technical Group with brief details of the case including:-

• name of the customer
• details of the subject property

• the respective valuations of the customer and District Valuer:-

• original and current
• the current valuation difference

• the reason for the difference

• the reason for the breakdown in negotiations
• brief outline of respective computations
• the tax at stake on the current valuation difference
• any known points of principle (including valuation matters)
• any other relevant details.

Full case review

Otherwise, you should ensure that a check of the case is carried out by a fully trained Inspector.

The check should ensure that the case is technically correct and that it is appropriate to, and ready for, the Lands Tribunal. The results should be recorded using the check list on form CG22, which should be signed by the Inspector carrying out the check. The notes to form CG22 give a guide to the main points which need to be considered, but they are not exhaustive and should not be used as an exclusive check list.

Form CG22 can be obtained using Forms and Letters in SEES.

If the check indicates that the case is not appropriate to the Lands Tribunal, or that it is not yet ready or not satisfactory for some other reason the case should be reworked as appropriate.

You should advise the Valuation Office Agency of the action you are taking; and whether as a result of the check the valuation originally requested is still required, so that their file should be kept open. If different valuations are required a fresh form CG20 should be sent.

Defendable on appeal

If the check shows that the case is ready to go forward to the Lands Tribunal should the appeal be referred by the customer, and you are content for it to proceed, you should write to the Valuation Office Agency advising:-

• that you have thoroughly checked the case and that, subject to the appeal report on the valuation dispute, it is suitable to be forwarded for a possible reference to the Lands Tribunal, and
• the amount of tax at stake on the valuation dispute.

You should request the Valuation Office Agency to forward the full appeal report, which should normally be received within eight to ten weeks.

Formal referral to CG Technical

On receipt, the Valuation Office Agency’s appeal report and any covering comments should be considered. If these confirm that the Valuation Office Agency is content for the valuation dispute to be referred for a possible reference to the Lands Tribunal you should prepare a comprehensive report on the land valuation dispute and this should be sent to Capital Gains Technical Group.

The report should include all of the information set out below together with the required attachments, including all of the enquiry papers:-

• the address of the property, and the customer’s interest therein which is the subject of the valuation dispute
• the date(s) of valuation
• the reason the valuation is required
• the record of the FT Inspector’s case check on form CG22
• the Valuation Office Agency’s appeal report
• the date on which the enquiry was opened and a copy of the notice
• a copy of any other formal notices made to date
• the alternative valuations of the Valuation Office Agency and the customer
• computations of the gains or losses based on those valuations, and the tax chargeable thereon
• any other information affecting the amount of the gain or loss
• full details of the circumstances of the disposal, drawing attention to any unusual or difficult points.

CG Technical do not have access to electronic case management systems, so you should agree with CG Technical how electronic documents will be made available.

Capital Gains Technical Group will consider the report and, if approved, the papers will be returned to you so that the enquiry can be formally closed and necessary amendments made on the basis of the valuations in the Valuation Office Agency’s appeal report.

However before taking formal action you should write to the customer and advise them of the current position and what is to happen next. You should repeat the contents of the Lands Tribunal warning letter as at Section 5 above, and say that the Valuation Office Agency are ready to resume negotiations.

1. Closure notice

Allow a month for any response from the customer. If the customer has not responded, contact the VOA to see if they have been approached directly.

If meaningful negotiations have not been resumed proceed to closure of the enquiry and inform the customer.

You should also make a report to Capital Gains Technical Group if the case is settled without an appeal being notified to the tribunal. This will allow Capital Gains Technical Group and the Valuation Office Agency to close their case files.

1. Appeal received

If an appeal is received, advise Capital Gains Technical Group of:-

• the receipt of the appeal and, in due course
• the outcome of any Internal Review, and
• if the customer notifies the appeal to the Tribunal.

When you are advised of the appeal being notified to the Tribunal the enquiry papers should be forwarded to Capital Gains Technical Group as soon as possible with your further report and the information and documents set out below.

The following information is needed by the Solicitor and should be provided on a separate typed sheet, and placed in a sub-folder together with copies of all of the formal documents in the case including notices and appeals. The original documents should be flagged and indexed.

• the address of the property, and the customer’s interest therein which is the subject of the valuation dispute
• the full name and address of the customer
• the name and address of any agents acting, their telephone number and reference, and their profession - whether accountants or surveyors etc.
• the full name of the Business Unit Head, and the office’s name and address, reference and telephone number
• the name of the Valuation Office Agency caseworker, and the Valuation Office address, reference and telephone number
• the date(s) of valuation
• the reason the valuation is required
• the type of assessment (CT or CGT), and the year of assessment or accounting period
• the date the formal notice of enquiry was issued
• the date the formal notice of closure was issued
• the date of any decision letter
• the date of any amendments to self assessments
• the date of all appeals
• the Valuation Office Agency’s unagreed valuation and the tax chargeable thereon
• the customer’s valuation and the tax chargeable thereon.
• the tax at stake.

CG Technical and Sols do not have access to electronic case management systems, so you should agree with CG Technical how electronic documents will be made available.

Capital Gains Technical Group will consider the further report and, if approved, the valuation dispute will be referred to the Solicitor in the first instance.

You will be advised when the dispute is referred to Solicitor’s Office.

1. Lands Tribunal

The Lands Chamber will categorise the appeal and notify the category to the customer and the HMRC office named in the case. There are four categories of appeal:-

• standard
• simplified
• special
• written representation.

Cases within the ‘standard’ or ‘special’ categories are usually prepared and presented by Solicitors Office. Cases categorised as ‘simplified’ or ‘written representation’ are not usually dealt with by Solicitor’s Office.

Once notification of the category of the appeal is received Solicitor’s Office will consider if the case is appropriate for them to take forward. If not the papers will be returned to the case owner or reviewing officer so that the appeal can be prepared and presented according to the procedures adopted by that business unit.

Further negotiation

If you receive any contact from the customer during the period in which action is being taken to prepare the valuation dispute for a possible reference to the Lands Tribunal you may explain what action is being taken. If the customer wishes to resume or pursue negotiations with the Valuation Office Agency at any time this should be encouraged. You should not imply that this will result in any alteration to the Valuation Office Agency’s valuation and you cannot commit the Valuation Office Agency to extensive negotiations.

If the customer has no further evidence to offer, the Valuation Office Agency may wish to do no more than to acknowledge any further communication. Negotiations which were unsuccessful within a reasonable time scale cannot be pursued indefinitely.

1. Interaction with First-tier Tax Tribunal

Whether a case with a disputed land valuation needs to be referred to the First-tier Tax Tribunal will depend on whether there are other issues under appeal.

If the only issue in a case is a valuation of land then the customer should follow the normal appeal process of appealing initially to HMRC until, if the appeal cannot be determined by negotiation, we have set out our final view. At this point the customer should apply directly to the Lands Tribunal. If the customer applies to the First-tier Tax Tribunal in such a case you should ask that Tribunal to direct that the case be referred to the Lands Tribunal in accordance with s46D Taxes Management Act 1970.

Where there are issues other than the valuation of land in dispute the other issues would normally be considered first by the First-tier Tax Tribunal before the case is referred to the Lands Tribunal to consider the valuation although it is possible for cases to go to the Lands Tribunal first.

If the issue of whether a valuation is required is also in dispute then the case must first be referred to the First-tier Tax Tribunal to consider that issue. For example, if the issues in the case are both whether there is a disposal otherwise than by way of a bargain made at arm’s length and of the market value of the land at the time of disposal then the First-tier Tax Tribunal would need to consider the first issue before referring the case to Lands Tribunal if a market value is still required.