Personal representatives under pressure on house valuations

06 June 2011

Last year HM Revenue & Customs challenged nearly ten thousand probate valuations of land, raising an extra GBP70 million of inheritance tax charges.

The exact number of disputed valuations was 9,368, according to official figures. Where a challenge was brought, the resulting re-valuation raised the house’s estimated value by GBP24,600, say tax advisers UHY Hacker Young.

HMRC’s new focus on property valuations is partly driven the partial recovery in UK house prices in some areas, where values have almost rebounded to their December 2007 peak, or even beyond. The most recent Land Registry data shows that the average house price in the South East is now GBP274,000, rising to GBP410,000 in Greater London.

But HMRC’s new enforcement powers are also encouraging it to crack down on alleged under-valuations for probate. The agency is now asking personal representatives how much care they took when getting an independent valuation.The implication, says UHY, is that penalties may follow where “reasonable care” was not taken with the valuation. If HMRC decide it was not, the estate and its beneficiaries could end up having to pay penalties of 30 to 100 per cent of the additional tax liability, on top of the additional tax due. This could be a considerable sum for some estates with a relatively small cash component, says UHY tax partner Mark Giddens.

Estate administrators are  advised to get several probate valuations, usually including one professional survey. But that may not satisfy HMRC, who consider that the PR also has a duty to draw the valuer’s attention to specific features of the property that may affect its price.

“The extensive powers now available to HM Revenue & Customs pose a serious financial risk to lay executors who make honest mistakes when getting a house valued”, commented STEP chief executive David Harvey. “That is yet another reason why personal representatives should retain a qualified practitioner to help them administer an estate of significant value or complexity.”




UHY Hacker Young





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