News & Insights

Most of us are aware that the role of an Executor when appointed under a Will is to administer the estate of a deceased person, in other words, to collect in the assets of the estate, discharge any liabilities and distribute the estate to the chosen beneficiaries.

However,  if an Executor is dealing with an estate which attracts Inheritance Tax then those administrative duties can become more onerous.  HMRC must be satisfied  that all proper enquiries have been made about the estate and in particular the respective values of the assets to ensure that the correct amount of Inheritance Tax is being paid.

In this regard, it is vitally important to ensure that proper and professional valuations (known as open market valuations) are obtained of those assets either by referring to stockbrokers for valuations of shares,  a valuer/auctioneer for that of furniture and personal effects and suitably qualified estate agents (preferably those holding RICS status) for that of any land or property held.   In the past, for example, agents could value  a property for  open market purposes at a certain figure but suggest that the “probate value” would be lower.  The ONLY valuation principle accepted by HMRC is open market value at the relevant date. In some cases valuations will be referred to the District Valuer (acting for HMRC) to negotiate or agree such value(s).

It is not sufficient merely to “guess” or “estimate” values which are capable of being determined by professional valuers. In some cases,  for example,  furniture may be worth little or nothing but a letter from a qualified person confirming this is less likely to be challenged by HMRC.   If an Executor is shown to be negligent in those duties HMRC does have the power to impose penalties and additional interest on any tax due.

Valuations are also important for capital gains tax purposes – a proper valuation obtained of an asset as at the date of death can also form the basis of calculating any capital gains tax liability if that asset is later sold at a profit (subject to any exemptions or losses that may be available).

If you would like any further information on this topic please contact Deborah Pearce on 01202 755980 or email d.pearce@laceyssolicitors.co.uk.