When someone passes away, the executor of their Will must value the deceased’s assets. The executor has a duty to collect in the assets, report their value to HM Revenue & Customs and transfer the assets in accordance with the deceased’s wishes.
What is Value
When providing a valuation for IHT purposes the executors need to include the value of the deceased’s interest in the property, be that the total value of the asset or the value of the shares the deceased holds in the asset. It is also important to understand the value of the property as at the date of death so that the correct Capital Gains Tax (CGT) can be calculated.
The value to be reported is based on the definition as set out at Section 160 of the Inheritance Tax Act 1984 and although it is different, it broadly accords with the RICS Red Book definition. For smaller, less complicated valuations it is commonplace to obtain multiple estate agents appraisals, however, the agents will be looking to ‘win’ your business and may inflate the value. For complex estates and where the property is either jointly owned or the ownership is part only (a share) discounts can be applied and an RICS Chartered Surveyor should be appointed.
Complex estates valuations can arise where, for example, the deceased owned 50% of a property or a portfolio. Where the ownership is a share of the title, the value is not necessarily the same percentage, as selling a share will attract a discount. Similarly, if the deceased owned a block of flats, the value is not the same as the aggregate value of all the flats. In differing locations “block sales” can attract premiums or discounts. Our valuation team will be able to advise on the impact on value.
Other complex scenarios can arise when the deceased owned commercial property or development land. Our valuation team, supported by our agency team, can advise on commercial and development valuations.
It is important to bear in mind that an incorrectly valued estate can result in penalties. When HMRC consider the IHT returns, they will appraise the valuations. A compliant valuation prepared by an RICS Chartered Surveyor under the governance of the Red Book will limit your exposure to penalties and may speed the whole process up by answering HMRC questions at the outset.