Inland Revenue Statement concerning valuation of household goods and effects and personal belongings
In December 2004 HM Revenue and Customs stated that it was anxious to establish whether the value of personal and household assets had been ascertained by an accredited professional valuer in accordance with the correct statutory principles. Considering this the executors will put themselves at high risk and possibly wide open for challenge and investigation by gambling with an inadequate and poorly prepared valuation report.
The risk of challenge by HMRC is obviously multiplied if executors provide highly important valuation reports for IHT calculations that have been compiled by an unprofessional appraiser, local furniture dealer, house clearance company, layman or any other unqualified individual for calculating the price the assets might reasonably be expected to fetch if sold on the “open market”
It set out circumstances which might lead HM Revenue and Customs to make further enquiries as to value and warned that it might also want to ask what steps the accountable people took to ensure that all goods had been accounted for.
From January 2005 HM Revenue and Customs will look particularly closely at the values included for household and personal goods and in appropriate cases will open an enquiry and ask for further information to satisfy themselves that all of the goods have been included and they have been valued on the statutory basis
HM Revenue and Customs have stated that they may ask.
1 For evidence of the instructions given to valuers
2 About the steps taken by accountable people to satisfy themselves that the valuation was carried about by an adequately qualified surveyor, is accurate and on the statutory basis
3 For photographs and further details if necessary of specific items
4 To inspect and photograph items which have not been sold
If HM Revenue and Customs considers that accountable people or their valuers have been negligent it will consider imposing penalties
The circumstances that currently cause HM Revenue and Customs concern are
Where it is unclear on what basis a valuation has been made. Valuations should not state that they are made for probate purposes instead the valuation should state that it represents the open market value
Where the accountable person has made an estimated valuation themselves, an explanation will have to be provided as to the basis on which the valuation has been made. It should also include details of what comparisons have been made
Where goods have been described as having “no value” it will be necessary to provide a full explanation of the circumstances and the basis on which that conclusion has been reached
Where insufficient details of a motor vehicle are given. It is necessary to provide details of the make exact model year of registration and registration number
Where a valuer has provided a range of values and the accountable person has included values from the bottom of the range HM Revenue and Customs works on the basis that the most likely price goods would fetch on the open market would be nearer the middle of the range
Where goods are jointly owned by non-spouses HM Revenue and Customs will want to know the facts establishing the joint ownership
An investigation and challenge of a house contents and personal possessions by HM Revenue and Customs will undoubtedly lead to a full investigation of the estate including the accuracy of the property valuation
Further reading and articles regarding HMRC IHT Tax investigations
https://www.theguardian.com/money/2012/sep/14/cheat-hmrc-property-value-inheritance-tax
http://www.uhy-uk.com/news-events/hmrc-launched-9368-investigations-inheritance-tax-valuations-last-year/
http://www.accountingweb.co.uk/tax/personal-tax/hmrc-targets-inheritance-tax-valuations
http://www.telegraph.co.uk/finance/personalfinance/tax/10580480/HMRC-takes-extra-23pc-from-inheritance-tax-challenges.html
