Dorcas Adebowale Akanwo v HMRC

For inheritance-tax valuation, market value under section 160 of the Inheritance Tax Act 1984 is determined by the open-market price at the valuation date. Comparable sales close to that date may provide reliable evidence where adjustments are made for material differences, including condition and size. A property let on an assured shorthold tenancy may properly be valued at a discount from its vacant-possession value where the evidence supports that adjustment.

The executor of the deceased owner appealed HMRC’s notice determining the inheritance-tax value of a terraced house at £260,000. She contended for £200,000, relying on informal estate-agent appraisals and concerns about the property’s condition and the absence of an internal inspection by the District Valuer.

The appeal was referred from the First-tier Tribunal (Tax Chamber) to the Upper Tribunal solely to determine the valuation dispute. HMRC relied on a chartered surveyor’s comparable-sales analysis, which assessed vacant-possession value and then applied a 5% allowance for the assured shorthold tenancy. The central issue was the property’s open-market value on 12 September 2012.

1. The appeal was dismissed. The Tribunal determined that the deceased’s freehold interest was worth £260,000 at the valuation date.

2. Under section 160 of the Inheritance Tax Act 1984, the relevant value was the price reasonably expected on an open-market sale at that date. There was no basis for reducing value because the whole property was offered for sale.

3. The executor’s informal agent appraisals did not provide evidence of sufficient weight to establish a £200,000 valuation. Although the valuer’s failure to inspect internally was regrettable, his comparable-sales exercise was sufficiently thorough.

4. The Tribunal accepted the adjustments made for the subject property’s greater size, its inferior condition and its downstairs bathroom. Most comparable sales were sufficiently close to the valuation date that time adjustment was immaterial. The accepted vacant-possession value was £275,000.

5. A 5% reduction for the assured shorthold tenancy was appropriate, producing a rounded market value of £260,000. No order for costs was made.

• Upper Tribunal (Lands Chamber): The appeal was referred by the First-tier Tribunal (Tax Chamber) under section 222 of the Inheritance Tax Act 1984 for determination of the valuation dispute. The Tribunal upheld the £260,000 valuation.
• HMRC statutory review: HMRC upheld its notice of determination on 21 April 2017.