Capital Taxation

Question 1

What is the RICS Guidance Note in regards to Capital Taxation?

Answer 1

UK National Supplement

Question 2

Which section of the UK National Supplement relates to Capital Taxation?

Answer 2

UK VPGA 15

Question 3

Where is the MV definition for SDLT Purposes defined?

Answer 3

S118 of the Finance Act 2003.

Question 4

Where can I find the MV definition for CGT Purposes?

Answer 4

S272 of the Taxation of Chargeable Gains Act 1992

Question 5

What is ATED?

Answer 5

Annual Tax on Enveloped Dwellings

Question 6

Main legislation for IHT?

Answer 6

Inheritance Tax Act 1984

Question 7

What is the IHT threshold?

Answer 7

£325,000 or £650,000 with the transferable nil rate.

Question 8

What is the definition of MV for IHT and where can I find this?

Answer 8

Market Value – defined in s160 IHTA
.. The market value of any property at any time for the purposes of this Act shall be the price which the property might reasonably be expected to fetch if sold in the open market at that time but that price shall not be assumed to be reduced on the ground that the whole of the property is to be placed on the market at one and the same time’

Question 9

What are some valuation factors to consider when approaching an IHT Valuation?

Answer 9

Damaged property – valuers report?
Tenanted property – rent?
On the market? – higher price?
Large garden – planning?
Improvements by 3rd party
Special purchaser – has it sold?
Undivided shares - % deduction?

Question 10

Primary legislation for CGT?

Answer 10

Taxation of Chargeable Gains Act 1992,

Question 11

What is PRR? Example of a PRR Case you’ve dealt with?

Answer 11

s222 of Taxation of Chargeable Gains Act.

Legislation allows permitted area of up to 0.5ha (1.23 acres) of garden and grounds OR larger if required for reasonable enjoyment of it as a residence

Explain case process; identify permitted area, what is reasonable in the locality, apportion slaes price between permitted and non-permitted area.

Question 12

Lead case re apportionment?

Answer 12

Salts vs Battersby 1910

Question 13

Lead case regarding teh valuation of undivided shares?

Answer 13

Wight v Moss.

10% if property co-owned but not in common occupation, 15% if in common occupation - reflects the risk of selling the property on the market with a co-owner.

Calculate the MV, deduct for 50% share then deduct further, say 10% to reflect occupancy.

Question 14

What can you tell me about Palliser v HMRC?

Answer 14

Reasonable valuer should take into consideration development potential when approaching valuation for capital taxation purposes if it is clear the property would received some form of benefit from development - Hale Barnes corner plot bungalow.

Question 15

How did you value the HMO in Huddersfield / Rusholme?

Answer 15

Investment method.
Gathered comp rent and yield evidence determined MR then capitalised by YP taken from the yield inversion to calculate a MV figure.

Question 16

What is a special purchaser?

Answer 16

Purchaser known to the market, stands to gain a benefit through the purchase of property and land therefore have a special interest in purchasing the property.

Question 17

What is prudent lotting?

Answer 17

If you need to make a valuation of an asset or collection of assets which can be broken up and sold in lots you should value the whole on the assumption that it will be lotted in such a way as to maximise the proceeds of sale.

In some cases the value of the whole may be greater than the total values of each item if sold separately. For example, the value of a complete antique porcelain dinner service may be greater than the sum of the values of each piece sold separately. If so, it should be valued as a whole.

Conversely, in some cases the value of the whole would be increased by the asset being broken up into appropriate lots, in which case this is the basis to adopt. For example, in the Estate Duty case of Duke of Buccleuch and another v CIR [1966] I All ER 129, the House of Lords held that a large Estate was to be subdivided into its natural units for valuation purposes.

Question 18

What is the difference between joint tenancy and tenancy in common?

Answer 18

Joint tenants have the same ownership share in the property e.g. 50/50.

Tenants in common have different share interest in the property e.g. 75%/25% between parties.

Question 19

What IHT exemptions are there?

Answer 19

Gifts to charities.

Lifetime transfer to spouse.

Transfer to family within 7 years of death.

Question 20

What do you understand by agricultural relief?

Answer 20

Not dealt with but;

Agricultural property is defined as agricultural land or pasture but also specifically includes:

Woodland, so long as it is occupied with and ancillary to the land and pasture;

Farm buildings, again, they must be occupied with and ancillary to the land or pasture;

Farmhouses and cottages but only if they are of a character appropriate to the land or pasture that is in the same occupation (this is discussed in greater detail below); and

It is important to note that the grazing of land by horses that are not connected with agriculture would render that land non-agricultural.

Question 21

What is a HMO, what is the minimum number of beds required to be classed as a HMO?

Answer 21

House in multi occupation - 3 people living in a property not from the same household.

Question 22

What is probate?

Answer 22

In property terms, the administering of a decesased persons estate.

Question 23

What yield did you adopt in the investment valuation of the HMO?

Answer 23

All risk yield.

Question 24

What is the IHT computation?

Answer 24

Value of estate @ D.O.D

• nil rate band
• any further feliefs

= IHT owed

Taxable amount @ 40%

Question 25

What is the CGT computation?

Answer 25

Disposal price

• Acquisition Price
• Allowable costs (improvements if added value)
• Tax Free allowance

= Chargeable gain

Question 26

What are purchasers costs made up of?

Answer 26

legal fees, agent fees and stamp duty

recent budget change that property value under £500,000 will pay 0% SDLT until 31 March 2020

Question 27

Any other PRR case law you are aware if regarding permitted areas?

Answer 27

Longson v Baker - challenged permitted area stating grazing land was needed for the reasonable enjoyment of the dwelling-house as a residence. DV agreed to a larger permitted areas just over a hectare regarding locality, VO decision upheld