HMRC investigating property valuations

HM Revenues and Customs is targeting increased numbers of inheritance tax property valuations, according to an accountancy firm.

UHY Hacker Young says HMRC has launched 9,368 investigations into inheritance tax valuations over the last year and is actively targeting estates and beneficiaries.

It says that according to HMRC’s figures, £70m worth of additional tax was raised as a result of HMRC challenging the valuations of properties included in the estate of a deceased person in 2010.

In cases where additional tax was payable, this averaged £24,600 per case.

Inheritance tax is typically payable if the assets of an estate total in excess of £325,000.

If an IHT property valuation is found to be incorrect and HMRC considers that ‘reasonable care’ was not taken in establishing it, the estate and its beneficiaries could be forced to pay a maximum fine of up to 100% of the additional tax liability, as well as the additional tax due.

Mark Giddens, a tax partner at UHY Hacker Young’s London office, says inheritance tax affects most of middle England, where the estate may consist of little more than an average sized property.

He says: “Obtaining further valuation quotes from estate agents or surveyors adds significant additional costs on the estates and ultimately reduces the final value for those who inherit them.

“However, with house prices in London and the South-East starting to return to pre-recession levels, beneficiaries need to be aware that the potential fine resulting from a mis-valuation will rise proportionately.”

Russell Cade, director at Move With Us, adds that the news HMRC is investigating the valuation of properties left by the deceased highlights the importance of obtaining an accurate valuation at the start of the property sales process.

He says: “Using more than one estate agent, as well as online data such as up-to-the-minute sales and market comparisons from multiple sources will give the beneficiaries and executors the information they need to prove the property has been accurately valued.

“Time is of the essence and valuations that are not only accurate, but done in a timely manner will speed up the process and ensure that any tax penalties are not incurred by the estate.”