Matt - Capital Taxation - Level 2

Question 1

Why was your valuation date 31st March 1982?

Answer 1

As instructed in the Finance Act 1988, instructed to value at this date was because of significant inflation and would be unfair to tax gains as a result of increase in general prices.

Question 2

How would you carry out a 1982 valuation?

Answer 2

1. Interrogate my firms records where possible
2. Auction records at the time from sources such as EIG
3. Refer to market records at the time where possible

Question 3

Tell us about the property you valued for your 1982 valuation?

Answer 3

The property is a 3-bed detached residential dwelling located in Solihull with a brick construction with a pitched tile roof. Amenities included off street parking and a garage, being 193 square metres in size.

Question 4

What was the returned value for your 1982 valuation?

Answer 4

£62,567 (calculated using Nationwide indexation)

Question 5

What was your valuation range for your 1982 valuation?

Answer 5

Between £62,000 and £72,000

Question 6

What was your final valuation for your 1982 valuation?

Answer 6

Ultimately the final figure was the returned figure as it fell within the valuation range, albeit towards the bottom, it was still crucially within the range

Question 7

What comparables did you choose to value your 1982 valuation?

Answer 7

Similar detached dwelling properties in the locality to the subject that sold close to the valuation date

Question 8

How did you decide upon your final value?

Answer 8

Ultimately the returned figure fell within the valuation range. I decided to accept it for this reason because of such a historic valuation date, it’s difficult to make decisions on adjustments and condition with historic numbers and also that I’m not sure what the condition would be circa 40 years ago.

Question 9

Tell me about the property you valued for CGT purposes in West Bromwich

Answer 9

The property is an industrial factory in West Bromwich with a 1970s to 1980s age and constructed with a steel portal frame with a PPM roof that is around 1,400sqm in size when measured to GIA.

Question 10

On what basis was your West Bromwich industrial property held?

Answer 10

It appeared to be owner occupied as there were no formal lease details available

Question 11

How did you value your industrial in West Bromwich?

Answer 11

I valued this property by the investment method and using the capitalisation technique.

Question 12

Why did you value your property using the capitalisation technique of the investment method?

Answer 12

Because there were no income details from a lease, I could therefore only capitalise a predicted rental income in to a capital value for the property.

Question 13

Talk me through your approach for the capitalisation technique.

Answer 13

1. I used sources such as CoStar and EG Radius to find lease transaction details for similar industrials in West Bromwich to determine a suitable £/sqm rental value.
2. After finding suitable rental evidence I then used similar sources to determine sales evidence in order to arrive at a suitable yield for the YP perp calculation.

Question 14

What is a yield?

Answer 14

It is a measure of potential returns on investment from a rent

Question 15

What yield did you use for your capitalisation technique?

Answer 15

I used an all risks yield, a gross yield

Question 16

What is an all risks yield?

Answer 16

It is an umbrella term for growth implicit yields that reflects all the risks and rewards of the subject property.

Question 17

What is a growth implicit valuation?

Answer 17

This is where any potential growth in market rents or capital values are reflected in the yield

Question 18

What is a growth explicit valuation?

Answer 18

This is where any potential growth is reflected in the cash flow and is discounted at a higher rate of return

Question 19

What are some examples of growth implicit valuations?

Answer 19

1. Term and reversion
2. Hardcore and layer

Question 20

What is an example of a growth explicit valuation?

Answer 20

Discounted Cash Flow

Question 21

Is having a lower or higher yield better?

Answer 21

The higher the yield then the riskier the asset

Question 22

Were you valuing at the date of acquisition or disposal for your property in West Bromwich?

Answer 22

The date of disposal

Question 23

What determines whether you’re valuing at the date of acquisition or disposal?

Answer 23

Instructions from HMRC

Question 24

What was the valuation date for your property in West Bromwich?

Answer 24

April 2017

Question 25

What was the returned value for your property in West Bromwich?

Answer 25

£800,000 at April 2017

Question 26

What was your valuation for your property in West Bromwich?

Answer 26

£900,000

Question 27

What was your rental figure and yield figure for your property in West Bromwich?

Answer 27

£45/sqm and a 7% yield

Question 28

Were you valuing at the date of acquisition or date of disposal for your 1982 residential valuation?

Answer 28

Date of disposal which was April 2022

Question 29

If the date of disposal was April 2022, why did you value as at 31 March 1982?

Answer 29

Because the date of acquisition would have been before 31 March 1982 hence why this becomes the date of valuation