Tax advice of the week: get IHT right
Nov 20, 2009
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Valuing property for inheritance-tax (IHT) purposes can be "far from straightforward", particularly in today's market, says Tax Tips & Advice. But if you're an executor, it's your job to work out the IHT payable on the estate.
Get asset valuations wrong and – if the taxman thinks you were careless – not only will the beneficiaries have to find the extra tax but you will be liable for a penalty. That's typically 20% but can be as much as 100% of the extra tax.
And be warned – the taxman's manuals aren't very helpful on property 'undervaluations'. However, recent advice has been published in the Tax and Trusts Newsletter. Follow it to show that you took reasonable care and "he won't charge a penalty even if he disputes the valuation".
The best bet is to get three valuations from different estate agents. Ask for a "valuation for IHT purposes to be made on a full open-market basis". You should also tell them – in writing – about any quirks and ask them to "report any unusual factors affecting their valuation".