Iht205 valued incorrectly, how to amend

[Ayse88]

Hi,

I completed my late father's iht205.
The property we valued at the time was tenanted and let to estate agent. Due to difficultly in possibly gaining possession and also the property having 2 kitchens at the time property was significantly undervalued.
We need to get probate as managing agent refused to speak to us without one. So based on the situation property was valued at £475k.
Fast forward 6 months we have now got the property back vacant, called a few estate agents and property will be worth £650k If we only remove the kitchen.
So it's a no brainer.
The property was exempt previously and will still be below the threshold due to spousal exemption, just change in value for the exemption based on property value now.

I want to know how we can now amend this?
Thanks

[AGoodman]

Would the estate still be an excepted estate (so subject to IHT205 rather than a full account)? If not (e.g. because it is now over £1m), you need to file an IHT400.

If it's still excepted, I don't actually know the answer but I would call HMRC. Assuming there is no other difference, it would be worth taking steps to register an updated valuation for CGT purposes - otherwise you're going to risk a large CGT bill when you sell.

Incidentally, that's a very large undervalue. You want a higher figure but step carefully and explain the circumstances as you don't want to talk yourself into a penalty.

[Ayse88]

So I called the probate line, they said that I won't need to submit any amendments if the value is still exempted for iht purposes, regarding cgt they were not able to help.
If the figure on the probate is taken I will face a huge cgt. I am stuck how to move forward?
BTW we filled in the iht205. I've checked to see if I can amend this and it appears only if I filled in the full iht form can I complete a c4 amendment.
Any advise much appreciated with way forward.
Thanks

[someone]

I don't have an answer but I think you need professional advice even if doing this is simple.

1. You're talking about inflating the probate value by nearly 50%. That on its own looks dodgy.
2. This inflation will save you something like 75k in CGT tax. Another reason for HMRC to be suspicious.
3. You say 'ripping a kitchen out' is what leads to this increase in value. HMRC would at least have a case that the increase in value is due to improvement.

If HMRC decides to challenge on any of these points (and no doubt there are more) then you're going to need help defending or you might end up with paying the tax and possibly penalties for deliberate tax evasion or paying penalties for a seriously erroneous probate value.

If it cannot be revalued, then getting that confirmed won't be that expensive, and if it can, you want all your ducks in a line (don't know if it's possible but I'd try seeing if you can get someone who will defend it against HMRC if there's an investigation. Will cost more up front but will mean you won't be worrying about billable hours later)

Don't you now wish you'd spent the 1k or so for a professional surveyor valuation for what appears to be a hard to value property. (if you did then I'd investigate whether you can sue them for gross negligence - but you'll still need an opinion that their error cannot be corrected to have any chance of getting significant damages from them)

[Ayse88]

I thought the worst case would be they would not accept my appeal and that would be cgt at 28% minium the improvements I made.

You mention 75k, that will be move like 40%, have I miss calculated?

This was not done with intent, I was unable to get the managing agent to communicate with me or let access to us without probate, so I needed to use rough figure based on properties near by.
It wasn't disputed by probate so I imagine they felt it was valued correctly.
The property is unique and rightly so would warrant a proper valuation and had we had access to the property we would have done so.
My priority was to get the agency to communicate with us, even after probate they took 6 months to give the property back.

[someone]

Sorry, yes, I think it is 28%. I was doing the calculations in my head and forgot that CGT is at a different rate to IT.