Capital Taxation Level 3

Question 1

Residential - Wolverhampton
What was the construction of the property?

Answer 1

Brick and tile in a reasonable state of repair but required some modernisation. Built circa 1980s.

Question 2

Residential - Wolverhampton
What modernisation was required? Does this impact value?

Answer 2

General repairs through the house and then a modern kitchen and bathroom to bring up to modern standards.

Yes, in my opinion the market would pay more for modern fittings.

Question 3

Residential - Wolverhampton
What advice did you give?

Answer 3

I advised HMRC and the representative the market value was too low. I provided evidence of this showing comparables selling for an increased figure.

I also explained the main evidence used by the representative had little weight as was a connected parties sale.

Question 4

Residential - Wolverhampton
Did you inspect the property?

Answer 4

Yes, I expected internally and the comparables externally.

Question 5

Residential - Wolverhampton
Why did you reduce your opinion of value from £350k to £340k,

Answer 5

This part of negotiations and was in my range of values.

I advised a senior colleague I felt this was reasonable and considering the valuation was a half share the tax implications would be minimal for the client.

Question 6

Residential - Wolverhampton
How did you negotiate the case?

Answer 6

I used communication methods such as phone and email.

I presented my evidence in a clear and concise manner. and explained the evidence did not support their figure of £265,000.

Question 7

Residential - Wolverhampton
What do you mean the taxpayers ownership was a half share interest?

Answer 7

The taxpayer owned the property with another person.

Question 8

Residential - Wolverhampton
Why did you deduct 10% from the half share in line with Wight v Moss?

Answer 8

As per the case law it is practice for a 10% deduction from the taxpayers share to reflect them having no rights to occupy the property.

Question 9

Residential - Wolverhampton
What were the tax implications?

Answer 9

I reported my value to HMRC. This would help them to assess if any inheritance tax was liable.

The estate would have to be worth over £325,000 for any tax liability,

Question 10

Residential - Walsall
What was the construction of the property?

Answer 10

Brick and tile construction. The property had been extended circa 2012 of similar construction. The property benefitted from floor to ceiling doors to the rear.

Question 11

Residential - Walsall
Why do you conduct initial reviews instead of inspecting immediately?

Answer 11

Value for money for the client. If the value returned is reasonable and no changes are obvious then this can get reported.

Question 12

Residential - Walsall
Why did you need to inspect this property?

Answer 12

The valuation returned was significantly below my initial review.

I needed to ascertain if there was a reason and to inform my opinion of value.

Question 13

Residential - Walsall
How did you negotiate the case?

Answer 13

I informed the representative the figure was low and presented my evidence in a tabular format.

Question 14

Residential - Walsall
Was your revised figure below your initial appraisal?

Answer 14

Yes, after inspection I found the majority of the property was in a good state of repair.

However, there were areas with damp, and unfinished so I adjusted for this.

Question 15

Retail - Wolverhampton
As the property was multi-let did you not think it would have been better to use the DCF method to value?

Answer 15

I could have valued using the DCF. However, in my opinion the investment method was more appropriate as only two tenancies present with differing terms.

Question 16

Retail - Wolverhampton
What did you find on inspection?

Answer 16

I found the property was in a reasonable state of repair with a hair salon on the ground and office/treatment rooms on the first and second floors.

I also fully measured the properties as there were no record of the size of the areas. I verified my areas with the marketing brochure.

Question 17

Retail - Wolverhampton
Talk me through your valuation process?

Answer 17

• I had regard to the leases and found the ground floor was at market rent & upper floors under rented.
• I decided to value the income flows separately. (Capitalisation for ground floor & Term and reversion for upper floors)
• I capitalised the rent on the ground floor by a gross yield.
• I capitalised the term on the upper floors by a reduced yield to reflect the lower rent until the end of the lease.
• I capitalised the reversion to market rent by a gross yield deferred until the end of the lease.
• Added the income flows together to arrive at a capital value.

Question 18

Retail - Wolverhampton
Should you have provided advice and reported the values of the property separately?

Answer 18

I considered this. However, I ascertained similar properties in the area with retail on ground and office on upper floors supported the value I arrived at.

Question 19

Retail - Wolverhampton
What value significant features did you find?

Answer 19

• Locality
• State of repair
• Size
• Fit-out of the property
• Suspended ceilings
• Lighting etc.

Question 20

Retail - Wolverhampton
What advice did you give?

Answer 20

I advised HMRC and my senior colleague of the value for the property.

I also advised the property should be valued as one as the values were the same as if they were separate.