Inheritance tax manual - Section 26 - Part 1 : Reference of Cases to the VOA

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Section 26: Inheritance Tax - Reference of Cases to the VOA

Part 1

26.1 Introduction

The role of the VOA is to provide valuation and other advice to HMRC in accordance with the statutory basis. In doing so, caseworkers should have regard to the principles of treating all taxpayers fairly and impartially and that they should be expected to pay only that tax which is due under the law.

In general, valuations should be such that the taxpayer pays neither too much nor too little tax. However, in marginal cases it is permissible to have regard to the amount of extra tax that would be payable when deciding whether or not to challenge a valuation submitted by the parties.

26.2 Scope of section

This section describes the various forms of reference that the VOA receives from HMRC. In England and Wales, these will be routed via the Nottingham Initial Appraisal Unit; whilst in Scotland, these will be routed via the Glasgow Initial Appraisal Unit. As from December 2009, virtually all references will be in Shared Workspace.

All references in this section to CEO refer to the CEO Professional and Policy Support (HMRC Team).

Time Limits

26.3 Time Limits and Targets

There are no specific time limits for reporting references from HMRC. Our Service Level Agreement (SLA) with them contains specific targets for reporting cases within certain average time. In practice this means the aim should be to report the majority of cases well within the stipulated average time. Achieving this means more time and resource can be expended on the more complex cases. The various Key Performance Indicators contained in our SLA with HMRC together with some intermediate time limits during the life of a case are referred to in Section 27 but a summary of their application is set out in tabular form in Appendix 17.

26.4 Importance of the Time Limits and Targets

Under s.233 IHTA 1984 (as amended) a taxpayer is liable for interest on unpaid tax. Generally liability accrues six months after the date of the taxable event.

Also, HMRC is committed to reducing the elapsed times of its enquiries and closer working with the VOA is part of this.

Caseworkers must therefore ensure that they cannot be said to have contributed to delays in dealing with cases and every effort must be made to adhere to all the time limits and targets set down.

Delay and Penalties

26.5 Remission of Interest

Where interest is payable in respect of an estate (see 26.4 above) and there have been unreasonable delays by HMRC by reference to published targets for dealing with correspondence, consideration will be given by HMRC to waiving interest for the period of the delay.

HMRC will, in the first instance, take an overview and, if they are satisfied there have been HMRC delays, they may offer remission to the parties. However, in cases of doubt, or where their initial offer is not accepted and they feel there has been delay in the VOA dealing with the case, they will consult with CEO before they decide whether further remission is appropriate.

In paper-based cases, CEO will forward the request by email, normally to the Sector Leader for the area in question. On receipt of the request the Sector Leader should arrange for the file to be forwarded to CEO.

CEO will then reply to HMRC, forwarding the diary report and giving an objective appraisal of the handling of the case in the context of the complaint that has been made.

If HMRC contacts the caseworker directly requesting Case Diaries or files and it is apparent that CEO have not been consulted first, the latter should be advised of the circumstances before any further action is taken.

In electronic cases, HMRC will produce the case diary from information available in the Shared Workspace file. This will be done in conjunction with CEO, who may contact either the Sector Leader or the caseworker, if any matters require clarification

Where IHT receive a claim for costs or compensation in relation to a delay or mistake attributed to the VOA, these cases will be passed to CEO to allocate to the appropriate VOA complaints team to consider and make any appropriate payment.

26.6 Penalties

Schedule 40 of the Finance Act 2008 introduced a new regime for penalties in Inheritance Tax cases, where the taxable event took place on or after 1 April 2009 and the due date for filing is on or after 1 April 2010. This Penalty regime applies where: there have been inaccuracies in returns or other documents; information has been deliberately withheld or false information has been deliberately supplied; or there has been a failure to notify HMRC of an under-determination of tax.

It is up to HMRC to decide on whether to pursue a penalty and the level of this will depend on whether the act giving rise to the inaccuracy amounted to careless or deliberate behaviour and whether the subsequent disclosure was unprompted or prompted by the actions of HMRC (including the VOA).

26.7 Penalties – Guidance and Examples

It is accepted that there may often be a range of valuations and agreeing a figure different from that returned does not automatically mean that a penalty will be in point. Some valuations will be more speculative than others (e.g. those with ‘hope’ of development value) and will inevitably have a broad margin for error. Sometimes incorrect valuations may arise as a result of an inaccuracy despite taking reasonable care and the legislation takes these cases outside of the penalty remit.

However, there are other instances when the taxpayer’s actions may render them liable to a penalty. Some examples of when a taxpayer’s actions may be regarded as giving rise to a penalty are listed below but this list is not exhaustive.

  • Giving incorrect instructions to a professional valuer (e.g. the valuer is instructed to ignore ‘hope value’).
  • Incorrectly identifying the property to be valued.
  • Valuing subject to a sitting tenant or other restriction when that is not the case.
  • Basing a valuation on incorrect floor areas or land areas.
  • Using incorrect trading figures when the valuation is based on the profits method.
  • Returning a valuation inconsistent with a valuation used for another purpose or other taxable occasion.
  • Agreeing a significant valuation change from an unrealistic returned valuation that cannot be explained adequately by difference of opinion.

Some of the actions above may not have been deliberate but they may suggest a “failure to take reasonable care”.

26.8 Penalties - Procedure

Caseworkers should be proactive in identifying cases where the taxpayer may be culpable and bring details to the attention of HMRC. Contact should be made with HMRC at an early stage and caseworkers should not wait for negotiations to be concluded. It is recommended that caseworkers initially discuss the circumstances with HMRC and then, if required, provide details in writing. Under no circumstances should caseworkers approach taxpayers or their representatives on this point.

In cases of doubt or where the case is particularly sensitive, difficult, protracted and/or there is a likelihood of complaint, advice should be sought from CEO.


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