27.78 Effect of tax assessment following agreement
Once a case has been reported to HMRC(IHT) in accordance with the above (including cases where the DV has decided to "no question" a returned figure at the Informal Appraisal stage (see 27.10 above)), a final assessment of tax may follow and normally the valuation will not be open to further review, even though the parties offer to re-open the matter by, for example, filing a corrective account because a sale has taken place at a substantially higher figure. However, where the value reported was based on erroneous information or the parties claim a return of tax following the sale of the property for less than the value reported, a further review of the valuation may be permitted by HMRC(IHT) (but see 27.31 above).
27.79 DV wishes to re-open case
If after a case has been reported to HMRC(IHT), the DV discovers that the opinion was based on erroneous information, HMRC(IHT) should immediately be appraised of the facts. No contact should be made with the parties at this stage.
NB. The mere fact that a property has sold at a figure higher than the reported figure will not constitute grounds for re-opening a reference.
27.80 Parties contact DV direct
If, after a case has been reported to HMRC(IHT), the parties contact the DV direct seeking to negotiate, the DV should in no circumstances enter into discussion but should instead immediately relay the facts to HMRC(IHT) and advise the parties accordingly.
Especially in circumstances where no or reduced rate Inheritance Tax is payable, DVs should be aware of the fact that the parties may be eager to substitute a higher value for a previously returned or agreed valuation in order to establish a higher base value for any Capital Gains Tax which may become payable on a subsequent disposal (see Chapter 1A section 6 para 6.137 et seq.)
Any request by HMRC(IHT) for the DV to reconsider a reported valuation should be treated as a Referred back reference and should be registered under the original reference, using the 03 Credit type. If, for any reason, the case cannot be re-registered under the original reference (e.g. because the case was previously reported using an 02 credit type), HMRC(IHT) should be advised of the new reference. Otherwise acknowledgements are not required.
27.82 Distinction between claims for fall-in-value and the reconsideration of an Opinion of Value following a sale
It is important to distinguish cases where parties are claiming that the reported figure was incorrect as evidenced by the subsequent sale from those where they are claiming "fall in value" or the s176 IHTA 1984 reliefs as described in Section 12. In the latter cases the parties are claiming in respect of sales within 3 or 4 years after a death that, at the date of sale, the value of the property was lower than at the date of death, whereas in the former the question to be considered is whether the subsequent sale price is sufficiently strong evidence to show that the reported valuation at the date of transfer requires revision.
27.83 General valuation factors
In the event of being requested to reconsider a valuation in the light of a subsequent sale, the DV should not feel bound either to maintain the original Opinion of Value or to adopt the sale price. The aim should be to arrive at the value as at the date of transfer having regard to the latest evidence available, but if the sale is at arm's length, a price realised in the open market should be regarded as substantial evidence of the value of the property transferred provided that there has been no change between the date of transfer and the date of sale in:-
- the open market value for the type of property concerned; or
- any other circumstances which would affect the value of the property.
27.84 Deaths on or after 18 March 1986
If changes have taken place between the date of transfer and the date of sale it should be borne in mind that if a valid claim for fall-in-value relief is made the DV will then have to consider what adjustments, if any, should be made to the sale price realised for any properties (sold by the "appropriate person" within the appropriate period) to take account of certain specified changes (see Section 12: para 12.27 et seq). This aspect of the matter should not be discussed with the parties or their representatives unless already dealing with a claim for fall-in-value relief. At this stage the DV will simply be considering what weight, if any, should be given to a subsequent sale as evidence of the value as at the date of death.
Once agreement has been reached in respect of a referred back case or HMRC(IHT) has advised the DV that no further action is required, the DV should issue a fresh final report on Form VO 1110 and follow the procedure set out in Part 4 above.