A robust attitude taken by an executor to the valuation of a property came to nothing recently when HM Revenue and Customs (HMRC) were successful in defeating the executor’s claim that a property valued by them at £475,000 for Inheritance Tax (IHT) purposes should be valued at £400,000.
The most surprising aspect of the dispute was HMRC’s agreement to the IHT valuation of £475,000, as the property was sold two years after the death of its owner for £675,000.
Criticising the executor’s evidence as ‘misleading’, the Tax Tribunal accepted that HMRC’s valuation should apply.
HMRC will often reopen IHT returns where assets, especially houses, are included in estate valuations for IHT purposes and are subsequently sold for a much greater sum than their probate valuation. A new penalty regime, which came into force in April 2010, makes undervaluations a significant risk for executors.
Click here for guidance on how IHT works.