Inheritance tax manual - Section 16 - Part 2 : Procedure : Initial references

Previous PageSection ContentsNext Page

TUS consultation sent to Paul Vardy, Jerry Bromfield, Jim McKenna, Gwenda Binks

Part 2 : Procedure – Initial Not Negotiated References

Procedure on receipt of case

16.30 Registration

All initial references from SAV involving property in England and Wales will be registered at Nottingham IAU Central Processing Centre (CPC). All initial references from SAV involving property in Scotland will be registered in Glasgow Central Processing Centre.

Initial references from SAV, referred on Form SAV/VOA1, should be registered as Case Type 182 (credit type 05) – for the avoidance of doubt, case type 183 should no longer be used. Initial references in cases involving goodwill, minerals, shipping and air transport, SDLT, SAV (Foreign), Plant and Machinery and Milk Quotas will normally be referred by memorandum, often via CEO or LPVU (see para 16.44 below – for the procedures for dealing with such references)

16.31 Misdirected cases

If the CPC forwards the initial case to the wrong caseworker/support, the recipient should forward the case to the actual caseworker/support (if known) or should return it to the CPC with an explanation as to why it has been returned. It will then be the responsibility of either the recipient caseworker/support or the CPC to update CRAC.

16.32 Papers incomplete

If there is insufficient information to identify a property in order to register a case on CRAC, the CPC should contact the SAV caseworker dealing with the case and registration should be delayed until sufficient information has been obtained. Once a case has been registered on CRAC, it should not be cancelled because the papers are subsequently considered to be incomplete but, instead, any clarification of instructions should be obtained from SAV as a matter of urgency. In references involving more than one item where sufficient information exists to register a case on CRAC against at least one of those items, the papers should not be returned and, again, any clarification of instructions should be obtained from SAV as a matter of urgency.

However, should it prove necessary to contact the parties, unless the referral documents clearly state that it is in order to do so, SAV must first be consulted to ensure the parties can be approached. N.B. This is the only instance where contact should be made with the parties at the Initial reference stage.

16.33 Part cases

Part cases arise where a reference involves property in more than one SVT sector area. In such instances the CPC will register a separate case for each sector geographical area involved. As outlined at para 16.5 above, details of other sector areas involved should be included on form SAV/VOA 1; additionally the CPC will advise each area caseworker of the other caseworkers involved.

Any necessary liaison with other sector areas should be undertaken before a report is issued.

16.34 Multi caseworker cases within a SVT geographhical area

References from the CPC will be sent to the sector area co-ordinator (sifter) for HMRC work (see para 16,37 below). If the case then fails the Stage 1 and 2 sift (see para 16.38 below) and there are multiple properties, which fall to be dealt with by more than one sector area caseworker, it is the responsibility of local caseworker support to provide each caseworker with details of the other caseworkers involved.

Any necessary liaison with other caseworkers should be undertaken before a report is issued.

16.35 Acknowledgements

The CPC will not send acknowledgements, it is the responsibility of local caseworker support to send an acknowledgement to SAV, within 5 working days of receipt, which should provide the name of the caseworker, their location and their phone number.

Procedure

16.36 Outline of procedure

All new SAV cases, referred on Form SAV/VOA1 should be subjected to the following three stage sifting procedure:

Stage 1 – initial opinion by Sector Co-ordinator (or nominated caseworker)
Stage 2 – risk assessment by Sector Co-ordinator (or nominated caseworker)
Stage 3 – consideration by caseworker and initial valuation (if required)

These stages are described below

Stage 1 Sift

An initial sift of all incoming cases should be undertaken by the Sector Co-ordinator for HMRC work or a nominated experienced caseworker. At this stage the sifter needs to make a positive decision that the case requires caseworker attention. If the sifter decides that the case does not require caseworker attention, because the valuation is likely to fall within the tolerance range specified by SAV on Form SAV/VOA1, it should be reported back to SAV at this stage (see para 16.41 below).

The sifter should consider the valuation returned from the desk, using any information immediately to hand. The objective is to produce from this a figure or range of figures to inform the risk assessment exercise undertaken at Stage 2.

The following sources of information may be considered:

  • The details included in any valuation report provided by the taxpayer.
  • The acquisition cost or any arms length sale price, when these are close to the valuation date.
  • Any sales or lettings of parts of the property.
  • Typical yields for commercial/industrial properties – sifters will be experienced valuers and it is anticipated that they will have (or will quickly build up) a view on yield ranges for the major property types across their areas of responsibility.
  • Property Market Reports for relevant years and 1982
  • Rating and Council Tax records. For non-domestic properties the 2005 or 2010 Rating List entries normally will offer a starting point for an estimate of rental value.
  • Details of sales of comparable properties. For domestic properties a quick postcode search for comparables may be carried out. For the purpose of the initial opinion it is only necessary to record a minimal number of comparables.
  • Digital Maps, DEFRA plans, Geological plans etc.
  • Copies of planning records including Unitary Development Plans
  • Press reports (for example EGi)
16.38 Stage 2 Sift

The objective of this stage of the procedure is to determine whether, having regard to the initial opinion formed at Stage 1, the figure returned can be accepted or (in the absence of a figure returned) the Sifter’s initial opinion can be supplied directly back to the client.

The relevant factors that will influence this decision include:

  • The probability of success in negotiation/subsequent litigation. There are circumstances where we may believe a more HMRC-favourable figure than that returned is correct but we have no evidence (and little prospect of getting that evidence) to prove it.
  • Where information is lacking, the prospect of securing the missing data. An obvious example here is that of pre-enquiry cases where SAV may ask for guidance on the value of land simply identified as “50 acres of farmland in Loamshire”. If the land cannot be identified from a search of sales by the named taxpayer the appropriate response to the enquiry would be to advise SAV that agricultural land in Loamshire has a value in the range £2-3,000/acre and that this ignores any value attributable to buildings.
  • Support supplied for figure returned. For example, a professional valuation supplied for a purpose other than the tax computation can be accorded more weight than an accountant’s mathematical interpolation between purchase and sale prices
  • Robustness of initial opinion. Clearly the sifter will have more confidence in some Stage 1 opinions than others, but it must always be borne in mind that this is a risk assessment process, not one offering guarantees of infallibility.

Whilst the above process has been broken down into two stages for the sake of clarity, in practice the steps may in some cases merge into one another. There will be many occasions when it will not be necessary for the sifter to come to their own figure, it being obvious at an early stage that the figure returned is acceptable. (For the avoidance of any doubt, the sifter’s reasoning must still be recorded in these cases, see para.16.41 below).

The aim should be to complete Stages 1 and 2 of the risk assessment within an average of 5 working days of receipt of the case.

If the case fails the stages 1 and 2 of the sift, the credit type should be altered from 05 to 01 on CRAC. Also if the case is to be allocated to a new caseworker, the caseworker details on CRAC should be changed at the same time.

16.39 Stage 3 Sift

On receipt of a file, which the sifter has passed on as being worthy of caseworker attention, the caseworker should review the sifter’s decision and reasoning and, with the addition of their local knowledge consider again whether the case can be reported back immediately. It is considered that a significant number of cases passing initial sift will still fall to be reported back immediately this way.

16.40 Valuation cases

If the caseworker decides that the case merits a full valuation then he/she should examine the papers to decide which of the following scenarios apply:

1) sufficient information is available to provide a valuation;

2) further essential information is required;

3) the case is complex or sensitive and warrants treatment as a request for an agreed valuation.

If the case falls within 3 above, then within 10 working days of the receipt of the case, the caseworker should contact the SAV caseworker and ask whether there is any objection to treating this reference as a request for an agreed valuation. If the SAV caseworker has no objection, the caseworker/support should alter the credit type to 02 and proceed in accordance with para16.50 et seq below.

16.41 Reporting Initial Reference cases

The not negotiated report should be sent to SAV within an average of 20 working days of receipt of the case, using form VO 1164 (see Appendix 6a). This form has been designed as an electronic template and should be completed and then sent by email to mailpoint.a@hmrc.gsi.gov.uk . The covering email should include the SAV reference and name of the SAV issuing caseworker.

Form VO 1164 provides three options. These are

.

i) No question need be raised on the value returned

ii) The value returned cannot be accepted and my informal opinion of value is £*

* This valuation is based on the following assumptions.: (see para 16.42 below)

* The confidence level of this valuation is A*B* because * (see para 16.43 below)

iii) The matter is now to be treated as a formal reference and a report will be issued as soon as possible.

A copy of the VO 1164 and the sent email to SAV should be retained on the file, for audit purposes.

NB Occasionally SAV will request valuations, under the same reference at different dates (e.g. 31 March 1982 and the date of disposal). Accordingly caseworkers must ensure that the Nature of event and Date of event boxes are completed before sending Form VO 1164 to SAV. Also for Part cases within a single SVT sector geographical area (see para 16,34 above), caseworkers must ensure only one VO 1164 is sent to SAV (normally by the co-ordinating caseworker).

16.42 Valuation assumptions

When a returned valuation cannot be accepted and it is necessary to report an alternative ‘not negotiated’ figure to SAV, caseworkers need to make their best estimate of value based on the information available and making reasonable assumptions. The report should clearly state the basis of valuation and detail any underlying assumptions; particularly where the value reported is substantially different from that returned. Where assumptions have been made that may be value significant (e.g. nature of tenancies), SAV should be requested to advise the taxpayer of those assumptions should they need to communicate the value to them.

If the returned value is being accepted, normally it should not be necessary to detail any underlying assumptions on VO 1164 and they should never be included in cases where the returned value is accepted in cases involving Post Transaction Valuation Check (PTVC) cases (see para 16.64 below).

16.43 Valuation Confidence levels

It is usually helpful to inform SAV of the strength of the evidence to support the valuation figure reported in the Remarks section of the report. For example:

    1. a) If the caseworker considers that there is good evidence to support the reported valuation then the report should be endorsed with a suitable comment. For example - “The property was sold 6 months after the valuation date for £x and in my opinion this provides good evidence to support the above valuation.”; or
    2. b) If the caseworker considers that the reported valuation is subject to particular uncertainties and should be treated with caution then the report should also be endorsed with a suitable comment. For example - “The above valuation reflects the hope of obtaining planning permission for residential development but no planning permission was in place at the valuation date. There were particular uncertainties regarding the suitability of the access required for development at the valuation date and the above valuation may be subject to material variation when further information is available. It is possible that a reasonable valuation could be as low/high as £x.”
16.44 Other Initial References from SAV

Initial references in cases involving goodwill, minerals, shipping and air transport, SDLT, SAV (Foreign), Plant and Machinery and Milk Quotas will normally be referred by memorandum, often via CEO.

Such references will normally require the caseworker to provide specific informal valuation advice and accordingly should be registered as case type 182, credit type 01 on receipt

Reports in such cases should normally be on Form VO 1171 and should be endorsed “As returned” or “Not negotiated”, as appropriate. The report should set out any Valuation Assumptions (see para 16.42 above) and should normally comment on the strength of the evidence to support the valuation (see para 16.43 above). The report should normally be sent by email to mailpoint.a@hmrc.gsi.gov.uk or to such other address as specified in the original instruction.

16.45-49 Reserved

Previous PageSection ContentsNext Page