HMRC inheritance tax focus on property valuations

The HM Revenue & Customs (HMRC) last year raised an extra £70million in inheritance tax by challenging property valuations made in the estates of deceased people. UHY Hacker Young say that the HMRC made 9,368 investigations into estates and beneficiaries last year, and in many cases found that a property valuation was too low, and that a revised valuation brought the estate over the tax-free threshold of £325,000.

Beneficiaries of an estate can face fines if the HMRC finds that "reasonable care" was not taken when a valuation of a property was made, and the valuation is not deemed to be accurate. Administrators of the estate are expected to involve a qualified independent property valuer and to draw their attention to any features that could increase its value. The HMRC even advises that multiple valuations should be obtained though the cost involved deters many families from doing this. The estate and its beneficiaries could be hit with a fine of up to 100% of the additional tax liability uncovered as a result of the investigation, as well as the payment of the additional tax itself.

A spokesman for HMRC said: "Only about 3% of estates pay any inheritance tax at all, but when the value of the property can materially affect the tax payable, it's only right we confirm the value offered. This is not an investigation but a routine check, which in the vast majority of cases simply confirms the value offered. This helps to protect both the exchequer and the taxpayer."

Lenore Rice, a solicitor specialising in estate planning and probate at Wilson Nesbitt solicitors in Northern Ireland, commented:

"Many estates are pulled over the tax-free threshold as a result of a property forming part of the estate. Even fairly modest houses can result in inheritance tax being on an estate.

"Estate administrators need to exercise caution and diligence when arranging a property valuation as the potential cost of a fine from the HMRC if they deem the assessment to be incorrect can impose a huge burden on the beneficiaries."

For legal guidance and information on estate planning, will writing, or the administration of an estate, contact Wilson Nesbitt solicitors in Belfast or Bangor by email at .

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