Iain Wallis

Proven Tax Strategies for High Net Worth Individuals

0191 603 0270

Follow Me on FacebookFollow Me on TwitterFollow Me on LinkedInFollow Me on PinterestFollow Me on YouTube
  • Home
  • About Me
  • Property Wealth Builder
    • Property Investor
    • Property Mentor
  • Tax Strategies
  • Keynote Speaker
  • My Books
    • Essential Tips to Avoid Property Taxes
    • Legally Avoid Property Taxes
  • My Blog
  • Contact

Be careful how you treat Grandma’s house

June 27, 2014 By Iain

Have you noticed how the recent rise in house prices has encouraged a spot of optimism and got everyone to talk up the value of their property? All well and good until someone inherits a property and then the value rather interestingly seems to head the opposite way, downwards!

Understandable maybe, because with the Inheritance Tax (IHT) nil rate band remaining frozen at £325,000 and the rising property market pushing middle England into the arena of Inheritance Tax; next of kin are keen to make sure they don’t hand over too much IHT to the tax man. Regardless of who you are HMRC will take a flat 40% of all your estate over £325,000. OUCH!

A note of caution though, in 2012/13 HMRC collected an extra £108 million of IHT by challenging and “adjusting” property valuations. They have the right to investigate valuations and over the last few years have been exercising this more aggressively than in the past. This trend is I’m sure going to continue given the improving state of the property market and HMRC coming under even more pressure to maximise revenues.

HMRC has four years from the end of the tax year in which someone dies to challenge an IHT calculation, longer if it can prove that executors did not ensure the calculation was correct or they had been perhaps ‘negligent’. This gives them plenty of time to check and compare similar properties with the Land Registry. So, take care! If you decide to sell granny’s house not long after the funeral for a price markedly higher than the value declared on the IHT form you could be heading for trouble. If you declare a value which seems low compared to what granny paid for it beware! Both will raise the suspicions of HMRC and could see you with a fine of up to 100% of the extra liability. The average amount of tax collected from this type of investigation in 2012/13 was £34,000 – imagine yourself as a beneficiary and having to find that amount of extra tax totally out of the blue!

As with all IHT planning, it’s all about being prepared. If you’re a beneficiary or an executor of an estate take steps as soon as you can to record the condition of the property i.e. by taking photographs and keep records of any repairs you undertake.

Whilst it will cost you in fees, these could possibly be reclaimed from the estate later, have a professional valuation undertaken by a Chartered Surveyor, who specialises in valuing land and buildings for people’s estates. Ask them to provide a realistic price of the property’s market value – the ‘open market’ value and ensure they take into account anything which might increase or decrease the value, such as:

a) If the property is in need of repair, ask the valuer to consider reducing the value to take this work into account.

b) There may be something about the property which makes it particular appealing to buyers i.e. an unusually large garden or access to other development land. If the property has features which make it more attractive then the valuation may need to increase.

It’s probably less likely that HMRC will challenge a valuation carried out by a Chartered Surveyor, compared to one say done by the local estate agent or by yourself, so it may be worth paying someone to give you that peace of mind.

It’s not all bad though, if you discover that the property had been over valued at the time of probate and sold for less, then you have up to four years from the death to claim the IHT overpayment back from HMRC.

If you need any help with IHT planning, or are interested in receiving further information or booking a strategic session with Iain, please contact Jacqueline on 0191 206 4080 or email admin@iainwallis.com.

Share on Facebook Share
Share on Pinterest Pin it
Share on TwitterTweet
Share on Google Plus Plus
Send To Devices Send

Filed Under: Inheritance Tax, Tax avoidance, Uncategorized Tagged With: HMRC, inheritance tax, Inheritance tax Jimmy Carr K2, North East, property investing, tax avoidance, tax evasion

Latest Posts

Pot Holes! Does Fiscal Phil build our Wonderland?

Introduction Fiscal Phil in his 2018 Budget provides a few nasty … Read More... about Pot Holes! Does Fiscal Phil build our Wonderland?

What’s the new rent a room relief legislation?

From 6th April 2019, new legislation, and not necessarily for the better, … Read More... about What’s the new rent a room relief legislation?

What’s George up to?

George Osborne delivered a headline grabbing budget and unusually for all … Read More... about What’s George up to?

Why are HMRC so inefficient?

These days HMRC call us customers but alas they’ve yet to discover the … Read More... about Why are HMRC so inefficient?

It’s not always a bunch of Roses

Congratulations to anyone who may be intending to ‘pop the question’ over a … Read More... about It’s not always a bunch of Roses

Copyright © 2025 Iain Wallis | Terms of Use | Privacy Notice | Cookies Policy

Website by Internet Power | Online Portal

MENU
  • Home
  • About Me
  • Property Wealth Builder
    • Property Investor
    • Property Mentor
  • Tax Strategies
  • Keynote Speaker
  • My Books
    • Essential Tips to Avoid Property Taxes
    • Legally Avoid Property Taxes
  • My Blog
  • Contact