Specialist Valuations

At Langley Byers Bennett we are capable of dealing with specialist valuations such as Capital Gains Tax and Probate Valuations.

Capital Gains Tax Valuations

Making sensible provisions for tax is an essential part of managing any property investment, large or small. Capital Gains Tax (CGT) can have a dramatic effect on your returns, often with substantial payments of tax having to be paid, so it makes sense to consider the matter seriously and take expert valuation advice to mitigate your liability.
The Basics

Tax is payable on any gain in value over the gross cost price of the asset after deducting sale expenses. This means CGT can arise on the sale of a property where its value has increased during the time it has been owned.

Until recently for individuals the gain was taxed as income, and could easily have been as high as 40% but under current legislation this has reduced to a uniform rate of 18%. There is also an exemption of £10,100 pa.

Notable exceptions are normally the sale of a main residence and the transfer of assets between spouses. However a gift to a child is not exempt.

Gifts 

You may have a liability for CGT when gifting a property, even if no money changes hands, if the value of the property asset has risen since it was purchased.

“With the passing of each year it becomes increasingly difficult to research the necessary evidence in order to assess the value of a property”

Specialist Research & Valuations

The research and valuation of property to limit tax liability requires specialist expertise. A property acquired recently, and purchased in the open market can be relatively simple to value for tax purposes. However when a property has been owned for some time, or has been inherited for example, it can be far more complex.

With the passing of each year it becomes increasingly difficult to research the necessary evidence in order to assess the value of a property and calculate the Capital Gains Tax base value and expert knowledge and experience is needed to uncover and correctly interpret the historic valuation data.

The importance of 31st March 1982

For properties owned before 31st March 1982 the Revenue take this date to be the valuation date, regardless of the actual date and price paid at the time it was purchased – even if that purchase price was much lower.  Any property purchased prior to this date, and still owned, should be valued as soon as possible to help you make sensible plans for any tax that may be due upon the disposal of the property in the future.

Probate Valuations

There is a well known adage that the only certain things in life are death and taxes. Unfortunately although the former is unavoidable, the latter can be mitigated!

On death, the value of a persons assets accumulated or inherited during their lifetime, and owned at the time of death, are assessed for Inheritance Tax purposes and valuations of any property assets need to be prepared in order to ascertain whether Death Duties are payable.

Most years, in the Budget, the government of the day reviews the Inheritance Tax thresholds, and sometimes increases them. For example, in 2000 the threshold (ie the amount before tax is calculated) was £234,000. In 2009 this amount had been increased to £325,000. However this tax free amount is increased in-line with inflation which does not remotely reflect the great rise in house prices over those years; and the disparity between rises in inflation as opposed to rises in property values mean that the Inheritance Tax net now catches far more estates than ever.

This year the threshold was frozen at £325,000 until 2014. The effect of this will be to bring many more people into the net because, as has been well documented, there have been rises in home value, in some cases significant and this would have the effect of increasing the value of a home owner’s estate with the threshold remaining unaltered for the next 4 years. This means the asset values will increase and the threshold stays static.

All of this could of course change if after the election, a different party is returned to power or there is a hung parliament as the successors to the present Government if indeed this is to be the case, would doubtless have their own views.

A probate valuation is essential in identifying the fair value of a property, if protracted delays are to be avoided in dealing with probate or other negotiations – maybe between inheriting parties for example. Acting quickly is essential as any Inheritance Tax unpaid after 6 months for the end of the month of death attracts interest, which at the present time is at a rate of 3%. It is therefore important to seek early professional advice on probate valuations for expert valuers.

It is vital to take good advice on the valuation issues as if any part of the estate is above the Inheritance Tax, Threshold Tax is payable at 40% on everything above the threshold limit. It is important to remember that this applies regardless of the income of the deceased.

Although sometimes relatively straightforward if the property is owned by only one person and to be inherited by a single individual; the valuation issues become much more complex when ownership is shared or owned in other ways, such as by a trust or a company for example. Some arrangements like shared ownership, could result in the value being discounted, sometimes by significant amounts, dependent on individual circumstances to the benefit of the estate so it is vital that they are properly investigated and accounted for.

Selwyn Langley FRICS AClArb is a Director of Langley Byers Bennett and has over 20 years of experience in this specialist valuation field, He can be contacted on:
Selwyn Langley: Tel:020 7822 8852, email: sml@lbb.org.uk