HM Revenue & Customs has ramped up scrutiny of housing valuations for inheritance tax, with the number of cases referred to the Valuation Office Agency (VOA) rising nearly 25% year on year, according to data from TWM Solicitors.
The firm’s research shows that in the 12 months to the end of last September, the number of HMRC referrals to the VOA, which provides property valuations to help HMRC determine how much inheritance tax is due, rose from 11,845 to 14,631.
TWM Solicitors said the rise in referrals reflects HMRC’s “increased efforts to recover revenue from underreported and misvalued estates”.
It added that because inheritance tax receipts have risen by more than 61% to £8.3bn since 2020, HMRC is “likely to be increasing scrutiny of returns to ensure the correct amount of tax is paid”.
According to HMRC figures, residential property accounted for 46.8%, or £29.5bn, of the net value of estates in the 2022-23 tax year.
Laura Walkley, head of TWM Solicitors’ private client team, said: “HMRC is clearly focusing on property valuations as a significant potential source of revenue. There has been a noticeable shift towards questioning figures submitted in IHT returns, rather than accepting them at face value.
“If an executor fails to report a property value properly, there can be financial consequences for the estate, such as additional tax and interest to pay – potentially by the executor personally. You are advised to use a proper valuation from a RICS valuer rather than an estimate from a high-street estate agent.”
Earlier this week, it was revealed that recent business rate reclassifications for serviced offices will deliver a £600m annual hit to the flex office sector, threatening both serviced offices and the government’s economic growth mission, according to analysis from consultancy ChamberlainWalker.
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