In this section
A reference will be classified as a Valuation Case when either HMRC requests specific advice or it has been reclassified from the Initial Appraisal stage (see para 27.14 above).
It must be remembered that time limits and targets run from the date that a reference is first received in the IAU (or in the cases of Referred Back cases – in the location) and not the date it is reclassified from the Initial Appraisal stage.
In the vast majority of cases, the caseworker should issue an opinion of value within 40 working days of receipt (see para 27.36 below). However, it is appreciated that there will be some instances where it proves impossible to form an opinion within this period (e.g. because vital information has not been forthcoming or the valuation considerations are particularly complex). In such circumstances it is essential to keep HMRC advised of the current position (particularly if the case has been referred by one of their Compliance Groups). Where a reference is still classified as a Valuation case after 60 working days from receipt, caseworkers should note the requirement to provide HMRC with an Interim Report (see para 27.43 below).
The issue of an opinion of value must not be delayed because a property is on the market for sale, even where it is considered to be of a speculative nature (see para 27.40 below for cases where the caseworker considers that negotiations should be delayed when it is considered advantageous to await the sale of a property which is considered to be of a speculative nature).
The VOA Initial Report (VO 1120) will act as an acknowledgement. For the avoidance of doubt, HMRC) do not require a separate typed acknowledgement in these cases. In other cases (e.g. where HMRC has requested specific information), a typed acknowledgement should be sent within 20 working days, if the information cannot be supplied within that period.
For the avoidance of doubt, no separate acknowledgements are required where a case has been referred to a caseworker via the Nottingham or Glasgow IAU.
It should be noted that CEO provides HMRC with a monthly list of all cases outstanding with the VOA. This list contains details of the current VOA caseworker, as registered on the Central Database and accordingly, it is important to ensure that details of the caseworker currently dealing with the case are entered on the Central Database.
27.19 Subsequent contact with HMRC)
The degree of contact with HMRC) will normally depend on whether the case has been referred to the VOA by the PC&S or Compliance group.
For cases referred by PC&S, it should not normally be necessary for the caseworker to contact HMRC before either Form VO 1101 is sent to the parties (see para 27.36 below) or, where the Returned Value(s) can be accepted, a Final Report is issued (see para 27.55 et seq below).
When the instructions do specifically call for subsequent contact, it is envisaged that this will normally either be: by email; or (where copies of correspondence etc. in non-electronic format are to be sent), in writing either via HMRC Accounts Office, Cumbernauld or by Taxpost Direct. Such contact should normally be in the format prescribed in Form VO 1103 (see paras 27.22, 27.37, 27.39, 27.40, 27.41 and 27.43 below). However, where appropriate, HMRC is happy for the VOA caseworker to contact their caseworker, or caseworking team, by telephone. In such circumstances, a signed and dated note of the conversation must be placed on the file. Submissions under para 27.45 (whether a determination is required) and para 27.50 (initiation of 120 day review) must always be either by email or in writing.
For cases referred by Compliance, caseworkers should note an enquiry will already have been opened and the case will have been allocated to a specific Compliance caseworker. In such instances, HMRC expects the caseworker to maintain regular contact with their caseworker, particularly where any problems are encountered or when valuations are put to the parties. Such contact will normally be by telephone or email
It must also be appreciated, irrespective of who has referred it, HMRC) will be keeping the case constantly under review and if, at any time, they decide that the tax at stake does not warrant the VOA continuing with it, they will request the caseworker to close the case. In such circumstances, the case should be reported by completing either Part 1a) or Part 1b plus Part 4 of Form VO 1110 (see para 27.55 and para 27.70) and Parts 2 and 3 where appropriate (see para 27.61 and para 27.68).
HMRC may also find it necessary to request expedition of certain cases. This will usually be because the parties are pressing for a settlement of the case; or else either, no acknowledgement has been received or, no interim report has been received after 60 working days (see para 27.43 below). HMRC will normally do this by issuing a Form VOA 4 (see Appendix 10). HMRC use VOA 4 as a multi-purpose form, namely;
- as a reminder for a progress update
- as a notification of any sales of which HMRC has been made aware
- as a notification of a claim for Fall in Value relief under section 191 IHTA 1984 (see Section 12)
- as a response to a caseworker's request as to whether a Determination of Value is required (see para 27.46 below).
If it is being used as a progress update, it must be completed and returned immediately; a copy should be kept on the file and the case dealt with as a matter of priority. It should be noted that if the VOA 4 has been sent to the VOA as a Word attachment to an email, any reply should also be sent by email (unless paper documents need to be attached) and a copy of the sent email should be retained on the file.
Unless HMRC have specifically requested that the caseworker/support should not contact them, the parties must be contacted within 20 working days of receipt of instructions from HMRC.
Contact will normally have been made by the IAU during the Initial Appraisal stage (see para 27.6 above). However, on receipt of the case in the local office, caseworkers must ensure the first contact is with the taxpayer's representative named on Form IHT405 (or equivalent). This contact should be made within 20 working days of the receipt date shown on CRAC and the purpose of this contact is to either:
- request an appointment to inspect, or
- request further information (see para 27.21 below), or
- advise the parties of the caseworker’s details, in the format set out in VO 1105 (see Appendix 9).
It should be noted the person named on the IHT405 may be the agent who carried out the original valuation and they may not be instructed to discuss the case with the VOA. If the caseworker believes this to be the case, they should contact HMRC and request details of an alternative person they can contact.
If contact is not in writing, notes of any discussions must be placed on the file and signed and dated by the person conducting the call.
Once contact has been established, caseworkers must ensure that contact is regularly maintained (i.e.. at no greater than 15 working day intervals) with either the parties or their representative. In particular, they must ensure that the parties are kept informed where action is delayed because information has been requested from a third party, e.g. a Local Planning Authority (see para 27.24 below).
It is imperative that the time limits referred to above are strictly adhered to, in order to avoid accusations of delay by the VOA.
In death cases, all negotiations with regard to value must be carried out with individuals who have been authorised to act by the deceased’s executors. If any other individual contacts the caseworker with a view to agreeing values (e.g. a beneficiary who is not an executor), the caseworker should satisfy him or herself that the individual has been authorised to act. In cases of doubt the caseworker should contact HMRC and advise them of the circumstances.
27.21 Additional information required from parties
Once a reference has been received in respect of a property and a case has been registered it is, in the first instance, the caseworker’s responsibility to obtain any further information from the parties. Where it is required in order to carry out a valuation, further information should be requested at the earliest opportunity and, ideally, at the same time as when the parties are first contacted in accordance with para 27.69 and para 27.20 above. Care must be taken to ensure that information is not requested which has already been provided by HMRC or the IAU.
27.22 Parties fail to supply information
If the parties do not respond to a request for information within 20 working days, a reminder must be sent.
If the parties fail to respond to the reminder within 10 working days or if they refuse to supply the requested information, the caseworker must immediately advise HMRC of the circumstances. It should be noted, HMRC have comprehensive information gathering powers; however, these powers can be compromised if action is delayed. Accordingly the time limits referred to above must be strictly adhered to.
This should normally be by email, including an Interim Report on Part 1 of Form VO 1103 (Appendix 13), which should be completed as follows
1a) must be completed and the (electronic) copies of any documents referred to, i.e. the original request for information, the reminder and (in cases where they have refused to supply information) any correspondence from the parties must be attached. If contact has been by telephone, reference should be made to the dates of any calls, the name of the person contacted and details of the required information.
1b) must be completed giving the reason as to why the information is required (e.g. where the caseworker is trying to establish who is responsible for repairing a particular property)
1c) should comprise, an estimate of value, or an opinion in respect of the requested advice, based on the information currently available. If the caseworker has insufficient information to provide this, sub-paragraph 1e) must be completed
1d) any assumptions made in arriving at the opinion at sub-paragraph 1c) must be stated
1e) should be completed as an alternative to sub-paragraph 1c) if the caseworker holds insufficient information to supply an estimate or opinion.
In multi-property cases, where information is only lacking in respect of certain items in a reference, the caseworker should complete Part 1 of VO 1103 in respect of those items only. Details of the current position in respect of the other items must be provided, by completing Part 2 (see paras 27.39, 27.40 and 27.41 below) or Part 3 (see para 27.43 below) of VO 1103 as appropriate.
Once contacted by the caseworker/support in accordance with the above, HMRC may then contact the executors (who may not even be aware of the fact that information has been requested) and, if the information is still not forthcoming, will consider using their information gathering powers. If, in the mean time, the parties contact the caseworker/support direct, HMRC must immediately be made aware of this. HMRC will, in turn, keep the caseworker informed as to any action taken. The VOA case should, of course, be kept open.
If HMRC's intervention results in the requested information being provided, the caseworker should continue with the case as normal. If, on the other hand, HMRC advise that they have been unable to obtain the information and instruct the caseworker to continue with the case, (e.g. because potentially substantial values are involved that might outweigh the appropriate penalty charges), the caseworker should proceed as instructed by HMRC.
27.23 Parties query information supplied by HMRC
If the parties query information already provided by HMRC, (e.g. where they query the basis of occupation of a property), HMRC should immediately be advised of the position and discussion with the parties on this particular point should be postponed pending further instruction.
27.24 Additional information required from third parties
There will be occasions where the caseworker will need to obtain information from a third party (eg. information from a Local Planning Authority where the caseworker is trying to establish whether planning permission for development was likely to be forthcoming at a particular date).
If this third party fails to provide required information within 15 working days of the original request, a reminder must be sent.
If this third party still fails to provide the required information within 10 working days of the reminder, the caseworker must immediately advise HMRC of the circumstances, in accordance with para 27.22 above.
HMRC will then consider whether there is anything they can do to obtain the information and will advise the caseworker on how to proceed.
27.25 Statutory provisions
Paragraph 12A of Schedule 36 of the FA2008 (inserted by paragraph 5 of Schedule 48 of the FA 2009) provides that an officer of Revenue and Customs may enter and inspect premises (and any other property on the premises) for the purpose of valuing, measuring or determining the character of the premises or property if the valuation, measurement or determination is reasonably required for the purpose of checking any person’s position as regards Inheritance Tax. A person who the officer considers is needed to assist with the valuation, measurement or determination may enter and inspect the premises or property with the officer.
This statutory inspection power is subject to conditions contained in paragraph 12B. An inspection using the statutory power contained in paragraph 12A may be carried out only if either Condition A or Condition B is satisfied. Condition A provides that the inspection is carried out at a time agreed to by the relevant person, and that the relevant person has been given notice in writing of the agreed time of the inspection. Condition B provides that the inspection has been approved by the tribunal, and any relevant person specified by the tribunal has been given at least 7 days notice in writing of the time of the inspection.
In most cases it will usually be possible to arrange an inspection for valuation purposes with the parties (or the current owner or occupier of a property) by agreement without resorting to formal use of the statutory powers. When arranging inspections by agreement, caseworkers should always follow the advice contained in the following paragraphs and if in any case inspection is refused or frustrated, caseworkers must refer details of the difficulty to CEO, in accordance with paragraph 27.28 below. Procedures for approving the issuing of notices to exercise the statutory powers and references to the tribunal for approval to meet the requirements of Conditions A and B above have been agreed with HMRC and CEO will advise the caseworker on the appropriate action to be taken.
27.26 Conduct of inspection
Caseworkers should always give prior notice of a proposed inspection and, if possible, confirm any verbal arrangements in writing before an inspection is undertaken. For tax confidentiality reasons the particular purpose of the inspection must not be disclosed. This is especially so in lifetime transfer cases. If some limited disclosure is considered necessary the use of the phrase "for revenue purposes" is appropriate. If for any reason an inspection is attempted without formal notice, tactful enquiries should be made as to whether it is convenient for an inspection to take place. If the slightest objection is made, or it would be imprudent to do so, the inspection should be postponed until after formal notice.
If an officer is confronted with a situation where only a minor (child) is present on the premises, under no circumstances should any inspection of the property be made either internally or externally. This also extends to the taking of, or checking of dimensions. On returning to the office, the officer should send a letter to the occupier explaining the circumstances and, an appointment should be made with a request that an adult will be present on the next occasion.
27.27 Authority to be produced
In all cases the caseworker should produce an authority to inspect.
27.28 Inspection refused
If after attempting to arrange an inspection by agreement facilities to inspect are refused or frustrated the facts should be reported to CEO within 5 working days of the refusal or the second failed appointment. The case file should also be forwarded with a memorandum giving an estimate of the value transferred, based on an inspection without entry on to the property. HMRC should be advised, by either telephone or email, of the action taken.
CEO will then advise the caseworker as to how to proceed.
27.29 Circumstances where inspection may be dispensed with
Subject to the exceptions listed below, caseworkers should endeavour to internally inspect all properties, prior to issuing an opinion of value, where the returned figure cannot be accepted. As well as Initial Appraisal cases, the exceptions are:
- cases where HMRC have instructed that an opinion of value should be provided without inspection
- value below tax threshold: where the cumulative total, including the present transfer at the returned figure, is less than the tax threshold, and it is clear that the valuation will not increase the cumulative total above that threshold. In such cases, the caseworker should proceed in accordance with para 27.35 below
- cases where the property has been sold (or sale agreed) at a figure different to the value returned and it is either proposed to adopt the sale price or, where there has been either a general rise or fall in price levels or a change in circumstances between the dates of death and sale, to adopt an intermediate figure (see para 27.36 below).
- where the caseworker considers they already have sufficient information on which to base an opinion (e.g. because the property has recently been inspected for local taxation purposes).
It is accepted that there will be certain circumstances where an internal inspection will not be feasible, e.g. where an estate consists of a large number of tenanted houses the caseworker may consider that only a sample of the properties should be inspected, or where a property has been gutted by fire and making an internal inspection would be dangerous. However, where an internal inspection has been dispensed with, this should be made clear to the parties when they are advised of the caseworker's opinion of value.
27.30 Inspection of comparables
Although, prior to the issue of an initial opinion of value, it will not normally be necessary to inspect comparables, caseworkers should take sufficient steps to satisfy themselves that the information that they hold regarding comparable properties is correct, e.g. ensuring that the details appearing on COVO print-outs agree with other data sources.
Before adopting a sale price as an opinion of value the caseworker should ensure that there have been no changes in the circumstances between the date of death and the date of sale which would have had a material effect on value.
It should be remembered that IHT valuations should be based upon values as at the date of death and, in a rising market there may well have been a considerable escalation in values between death and sale. In such circumstances, even though the parties may have volunteered to substitute the higher sale price, caseworkers must always ensure that the value eventually adopted is in line with values prevailing as at the date of death.
Where an item has sold, parties sometimes claim that the sale price should be adjusted to exclude other items included in the consideration, e.g. chattels. Where such other items would have comprised part of the deceased's estate, HMRC should be advised of the circumstances so that they can check that the value claimed for them is consistent with the value returned.
27.32 Possibility of claim for Fall in Value Relief
Where the sale price is below the returned figure, Fall in Value Relief under s191 of the Inheritance Tax Act may be available. How the caseworker should then proceed will depend on the circumstances of the case.
If the market has fallen and the caseworker is of the opinion the returned value is not understated, in paper-based cases, the case should be reported with the endorsement “As returned” and sub-paragraph i of Form VO1120 should be completed (see para 27.55 below). The caseworker should make it clear in any contact with the parties that it is for HMRC to decide whether Fall in Value Relief is applicable.
If, on the other hand, the caseworker suspects the returned value has been deliberately over-stated, (e.g. because no or little IHT is likely to be payable because the estate is on or near the IHT threshold; or Agricultural Relief or Business Property Relief is available and the value determined for IHT purposes will be used as the base value for Capital Gains Tax purposes) the caseworker should enter into negotiations with the parties. The caseworker should also liaise closely with HMRC since it may well be the case that a reduction may take the estate below the chargeable threshold or 100% Agricultural Relief or Business Property Relief may be available and the need to agree a valuation may prove to be unnecessary.
See section 12 for further information on Fall in Value Relief.
27.33 Special purchaser
If the caseworker is proposing to adopt a sale price paid by a sitting tenant or other special purchaser, it may be necessary to make enquiries to establish whether the same figure would have been appropriate at the date of death (see Section 7 para 7.5 et seq).
27.34 Enforceable contract for sale or Notice to Treat at date of death
If, prior to the date of death, either an enforceable contract for sale has been entered into or a Notice to Treat has been served or has been deemed to have been served and a price fixed, then an equitable conversion of the property into cash has taken place and the question of the value of the property itself will not normally be referred to the VOA. Should it be discerned, on receipt of a case, that a property may have been the subject of an equitable conversion at the date of death, the caseworker should advise HMRC accordingly and await further instructions.
27.35 Parties figure acceptable
Where, after further investigation or inspection, the values returned by the parties can be accepted, the case should be reported to HMRC, by completing Form VO 1110 (see para 27.55 and Appendix 14).
If, on a death case, the proposed valuation does not raise the cumulative total above the tax threshold operative at the date of death, Part 1b)x of VO 1110 should be completed. This procedure, however, must not be adopted for lifetime transfers.
Provided that contact has been made with them, the parties must be notified that the returned values have been accepted and the matter reported to HMRC. Part 4 of VO 1110 should be endorsed accordingly.
27.36 Parties figures not acceptable
Except in the following cases:
- those involving leases for life (see Section 8); or
- those where the proposed valuation does not raise the cumulative total above the tax threshold operative at the date of death (see para 27.35 above); or
- those where the property has been sold for a figure less than the valuation and a claim for Fall-in-Value Relief seems likely (see Section 12, para 12.74),
in all instances where the returned figure is not acceptable, the parties should be notified accordingly. In the vast majority of cases an opinion of value should be issued within 40 working days of receipt of the case. It is, however, accepted that in some cases this will not be possible because, for example, essential information has not been forthcoming or the valuations are particularly complex.
Before sending the notification, caseworkers must satisfy themselves that the addressee has the authority to act in respect of the estate (see para 27.20 above).
This notification should preferably be in writing, normally using Form VO 1101 (Appendix 11), inserting the total value of the properties and the "agricultural value" if appropriate. The properties should be listed to show the value proposed not only for those where the value returned is unacceptable but also for those where the returned or offered value can be agreed. This is to help parties ensure that the interests and values for the estate are correctly identified and complete. Col(3) of the VO 1101 should furnish the minimum indication necessary to this end; in particular, if the property valued is subject to a tenancy or lease this fact should be stated (e.g. "FH subject to tenancy").
The parties should be advised if any property has not been inspected (see para 27.29 above) and of any assumptions made which, if they should prove to be incorrect, would give rise to a significant change in the proposed valuation. Examples of such assumptions include:
i) where the valuation assumes that planning permission is likely to be granted for development;
ii) it is assumed that vacant possession can be obtained of a property which is occupied by a third party;
iii) it is assumed that a special purchaser would have been in the market for the interest in question.
Form VO 1101 should not be used where the value transferred differs from the value of the property transferred (see Section 4 para 4.16 et seq), or when its use would obviously be inappropriate or would not clearly convey the required information. In such instances the parties should be notified of the valuation by letter including therein all the information which would normally be shown on Form VO 1101.
If the notification of opinion is not made in writing, full details of all telephone conversations etc. in respect of the opinion must appear on the file and must be signed and dated by the caseworker.
Where the case has been referred to the VOA by a Compliance Group of HMRC (see para 26.19 above), the caseworker should, at the same time, also advise the Compliance caseworker of their valuation.
27.37 Parties agree to caseworker's figure or suggest an acceptable alternative
Where the parties reply to Form VO 1101, either agreeing with the caseworker's figure, or suggesting an acceptable alternative, the case should be reported to HMRC by completing Form VO 1110 (see para 27.55 below) within 10 working days of the receipt of the reply. In those cases where, the caseworker has accepted an alternative figure offered by the parties, they should be advised of the action taken.
Where the parties have agreed verbally the caseworker should advise HMRC accordingly, preferably by completing Part 3 of Form VO 1103 (see paras 27.19 above and 27.43 below). HMRC) will then seek confirmation of the agreement from the parties and, in appropriate cases, invite a deposit. If agreement is forthcoming, HMRC will advise the caseworker accordingly and the case can be closed. If agreement is not forthcoming, HMRC will advise the caseworker as to how to proceed.
27.39 Parties do not agree
If the parties cannot agree to the caseworker's valuation or if the caseworker cannot agree with their revised opinion, the caseworker should open negotiations and proceed in accordance with para 27.44 below.
If they have not already been made aware, HMRC must immediately be notified of the position by the caseworker, preferably by completing and dispatching Part 2 of Form VO 1103 (see para 27.19 above). The name of the person/firm with whom the caseworker is negotiating should be stated when completing sub-paragraph 2f) of VO 1103.
27.40 Parties are not prepared to discuss as the property is on the market for sale
If the parties cannot agree to the caseworker's valuation and they state that they are not prepared to negotiate because a property is on the market for sale, the caseworker should, within 10 working days of receipt of their response, advise HMRC, preferably by completing and dispatching Part 2 of Form VO 1103 (see para 27.19 above). If the asking price is known, this should be stated when completing sub-paragraph 2h) of VO 1103. Any comments that the caseworker might have on the asking price, especially when it is higher than the caseworker's valuation, should also prove useful.
If a property which is considered to be of a speculative nature is on the market and there are few, if any, comparables; if the caseworker considers that negotiations should be delayed because awaiting a sale might be advantageous, HMRC should be advised accordingly. The parties must also be advised of the action taken. The case should be kept open and reviewed at 4 weekly intervals and if it is still outstanding after 3 months form the date HMRC was notified, an interim report should be sent to HMRC, preferably by completing and dispatching Part 2 of Form VO 1103.
27.41 Parties fail to respond to notification
If no response is received from the parties within 15 working days of notification under para 27.36 above, a reminder preferably on Form VO 1102 (Appendix 12) should be sent.
If no reply is received to this reminder within 10 working days, the caseworker should immediately advise HMRC, preferably by completing and dispatching Part 2 of Form VO 1103 (see para 27.19 above), giving the dates of dispatch of both VO 1101 and VO 1102 and completing sub-paragraph 2g).
27.42 Late response from the parties
Where the parties respond to the notification of value after HMRC has been contacted in accordance with para 27.41 above, the caseworker should immediately advise HMRC, either by email or by telephone and proceed in accordance with paras 27.37 - 40 above.
27.43 Interim reports
If any Valuation case is still outstanding after 60 working days from the date of receipt and the caseworker has not already contacted HMRC under any of the above paragraphs, the caseworker should advise HMRC of the current position (i.e. current opinions of value, likely negotiating position etc.) and giving the reasons for any delay. This contact should either be by telephone or by email, preferably completing Part 3 of Form VO 1103 (see para 27.19 above). N.B. If Form VO 1103 is used, the caseworker must ensure that the option referring to a Determination of Value is deleted.
Once negotiations have commenced, the caseworker should ensure they remain active and that there is contact with either the parties or their agents at no greater than 20 working day intervals.
It is important that the caseworker keeps HMRC advised of developments and, in particular, advises them of any changes in either the caseworker's or the parties' figures. This not only allows HMRC to monitor the tax at stake but also, in the case of a higher figure volunteered by the parties, gives them a chance to invite the parties to pay any additional tax which may be due on their revised figures, thereby mitigating any interest which may become payable later.
If, at any stage, HMRC advise that the tax at stake does not warrant the caseworker continuing with the case then the caseworker should report the case by completing Parts 1a) and 4 of Form VO 1110 (see paras 27.55 and 27.70 below) and Parts 2 and 3 where appropriate (see paras 27.61 and 27.68 below).
27.45 Negotiations dead-locked
If the parties or their agent fail to respond to correspondence from the caseworker or if the caseworker feels they are deliberately stalling, HMRC should immediately be advised of the position and a strategy agreed as to how to proceed.
If, on the other hand, it becomes clear that a genuine dead-lock in negotiations has been reached, the caseworker should request whether a determination of value is warranted, by completing Part 5 of Form VO 1103 (see para 27.19 above).
It must be remembered that, if HMRC decides that a determination is warranted, a full appeal report will be required (see para 27.47 below). Accordingly, when completing sub-paragraph 5i) of VO 1103, the caseworker must state any assumptions that have been made in arriving at the opinion of value and, if it is felt that there are any weaknesses in the caseworker's case, these must be drawn to HMRC's attention at this stage (see paras 27.48(4) and 27.49 below for further guidance on this). HMRC must also be advised at this stage if a point of principle is at stake (e.g. the discount to be applied in valuing an undivided share in accordance with Section 18).
In addition copies of the most recent exchange of correspondence must be attached and sub-paragraph 5j) should be endorsed accordingly.
HMRC's response to the determination enquiry
Once HMRC has received an enquiry in accordance with para 27.45 above, they will decide whether a determination is warranted and then advise the caseworker (normally using Form VOA 4 - see para 27.19 above) that either:
- a determination is warranted - (In this event the caseworker should proceed in accordance with para 27.47 below); or
- the case is not worthy of pursuit - (In this event the caseworker should report by completing Parts 1a) and 4 of Form VO 1110 (see paras 27.55 and 27.70) and Parts 2 and 3 where appropriate (see paras 27.61 and 27.68); or
- HMRC is making further enquiries - (In this event the caseworker should await specific instructions from HMRC and proceed accordingly).
27.47 Appeal Reports
Where HMRC has indicated that a determination is warranted, the caseworker must complete an Appeal Report within 20 working days.
Most Appeal Reports should be based on the format set out in Appendix 18. However, in cases involving claims for Agricultural Relief, the report should be based on the format set out in Appendix 19.
The caseworker should forward the completed Appeal Report together with the case file to their Sector Leader for signing. The Sector Leader should then proceed in accordance with para 27.48 below, before forwarding the report and file to CEO, for consideration in accordance with para 27.49 below.
Where the issue of whether cottages, farm buildings or farmhouses qualify as "agricultural property" (see Section 9 Part 2) is in dispute, the Appeal Report should incorporate the consideration of the character appropriate tests described in PN10.
Caseworkers should be aware that once an appeal report has been endorsed by CEO and passed to HMRC, in accordance with para 27.49, HMRC will then consider issuing a Notice of Determination, which in turn may lead to an appeal to either the First-tier Tribunal (Tax) or Upper Tier (Lands Chamber) (see para 27.54 below). Accordingly, they should ensure that they have all material, which they would need to prepare an expert’s report, available to them, or, if not, such material is capable of being obtained within a short time frame. If it is envisaged that difficulties are likely to be encountered in obtaining this supporting information, this should be made clear in the Appeal Report.
27.48 Personal satisfaction of Sector Leader as to status
In all disputed cases the Sector Leader (or report's signatory) should personally review the matter to ensure that:-
- The approach to the valuation is correct in principle and law (after obtaining appropriate advice as necessary);
- The available evidence, whether by way of transactions or other sources (subject to any necessary consents being forthcoming), adequately supports the Opinion of Value, any known evidence which could discredit the valuation being sufficiently outweighed by favourable evidence;
- If evidence is scant or non-existent, so that the valuation is largely or wholly unsupported, the Opinion of Value is a logical and reasonable one having regard to all the circumstances. The availability of any evidence which could discredit the Opinion of Value, whether or not such evidence is known to the taxpayer, would have particular significance in such circumstances;
- If, despite the endeavours of HMRC and the caseworker, it has proved impossible to obtain factual information, or factual information is in doubt (see para 27.22 above), that the assumptions behind the valuation are reasonable even though they favour HMRC. If in the event of those assumptions proving incorrect there would be a substantial variation in the Opinion of Value, attention should be drawn to this in the submission.
If the Sector Leader is not satisfied that the case falls within sub-paras (1)-(4) above, the valuation must be reconsidered as a matter of urgency. Any revised Opinion of Value should immediately be notified to the taxpayer and HMRC advised accordingly. The caseworker should then await the parties’ response to see if the matter can be settled by agreement.
If the parties fail to agree or fail to respond to this notification within 25 working days (viz. following a reminder sent after 15 working days), the caseworker must resubmit part 5 of VO 1103 to HMRC. The caseworker should then proceed in accordance with para 27.46 above.
Wherever possible, the report's signatory should not be the caseworker.
Review by CEO
On receipt of the appeal report and case file, CEO will review the case with a view to placing it in one of the following categories:
- The figure is fully defendable, i.e. CEO is satisfied that there is sufficient evidence to support the opinion and there are good chances of a favourable outcome if there were to be an appeal to either the First-tier Tribunal (Tax) or Upper Tier (Lands Chamber)..
- The figure is defendable and there is sufficient evidence to support the opinion, i.e. CEO is satisfied that there is sufficient evidence to support the opinion based on the information available. However, the caseworker has been required to make assumptions and/or information is lacking.
- The figure is defendable but there is a lack of supporting evidence or there are serious doubts whether a favourable outcome will be obtained before the either the First-tier Tribunal (Tax) or Upper Tier (Lands Chamber).
- There is insufficient detail at present to form a view as to whether the opinion is defendable and the caseworker is required to undertake further research.
- The figure is not defendable.
CEO will notify both HMRC and the caseworker of the category into which the case has been put and will return the case file to the caseworker within 10 working days of receipt of the report.
In cases classified as falling within categories a, b, c and e), CEO will forward the report to HMRC and the caseworker should proceed in accordance with Part 3 below.
In cases classified as falling within category d), CEO will return the papers to the Sector Leader with specific instructions as to how to proceed.
27.50 Case review
If a case is still outstanding after 120 working days from the date of receipt, HMRC are required to conduct a case review. The caseworker should initiate the review by completing Part 4 of Form VO 1103 (see para 27.19 above), setting out the current position in respect of the case and specifying: the respective current valuations, the current status of negotiations, an assessment of the strength of the case (see para 27.49 above for guidance), the "bottom line" figure at which a settlement could be recommended and any necessary factual information that is in doubt or has not been made available.
HMRC will then review the case and will advise the caseworker either:
- to proceed with negotiations, in accordance with an agreed strategy and timetable (which might include a letter direct to the parties from HMRC; or
- prepare an Appeal report, in which case the caseworker should proceed in accordance with para 27.47 above; or
- that the case is not worthy of pursuit, in which case the caseworker should proceed in accordance with para 27.46b) above; or
- that HMRC is pursuing a tax settlement, in which case, if successful, HMRC will subsequently advise the caseworker accordingly and the caseworker should then proceed in accordance with para 27.46b) above. If a tax settlement is not achieved HMRC will advise the caseworker as to how to proceed.