Lifetime valuations can be a useful strategic tool for landowners. A forthcoming succession, pre-death tax planning when creating a Will, the anticipated sale or development of land, changes in tax reliefs and when considering using land for secured borrowing are all potential triggers for requiring a lifetime valuation.
In the context of succession, a valuation will form the basis of how interests in the land are parcelled up to ensure fairness between family members. The valuer will need to look at agricultural value (which can be notoriously contentious in relation to the farmhouse), market value (for example in the context of cottages let to third parties) and potential development – or ‘hope’ – values in making their recommendations.
Hope value is notoriously difficult to calculate. However, as shown by the 2018 case of Palliser v CRC, it cannot be ignored. Here HMRC successfully challenged the probate valuation of a London flat that did not factor in hope value even though – in HMRC’s opinion – there was potential for future development. The result was a much larger inheritance tax bill than originally anticipated.
Undertaking a lifetime valuation, as with taking any form of professional advice, carries a financial cost. In order to ensure that the valuation obtained is worth the valuer’s fee, it is important to work with your solicitor and accountant to (a) appoint a valuer with appropriate experience and (b) ensure that they understand the purpose of the valuation, your aims and provide good quality comprehensive instructions and access to all necessary documentation.