Challenging HMRC Valuations
How to dispute property and asset valuations for inheritance tax purposes
Challenging or defending an IHT valuation — how it works
HMRC can query values you report on IHT400. Property cases are handled with the Valuation Office Agency (District Valuer); shares and business assets are handled by Shares & Assets Valuation (SAV). Typically you'll exchange evidence, negotiate, and—if needed—use HMRC Alternative Dispute Resolution (ADR) or appeal to the Tax Tribunal.
- • A RICS Red Book compliant report, with clear methodology.
- • Comparable evidence (dates, adjustments, and why they are comparable).
- • Special assumptions stated (e.g., vacant possession; no special purchaser unless justified).
- • Undivided share / minority and marketability discounts explained and evidenced.
- • For shares/business: income/earnings basis, asset basis, and any control or liquidity adjustments.
When to Challenge a Valuation
HMRC's valuations can sometimes be higher than market reality, particularly for unique properties or specialist assets. You should consider challenging a valuation if you believe it significantly exceeds the true market value at the date of death.
- • Residential property in declining markets
- • Commercial property with tenant issues
- • Shares in private companies
- • Agricultural land with development restrictions
- • Artwork and collectibles
- • Property with structural defects or legal issues
HMRC Valuation Routes
Land & buildings (VOA/District Valuer)
HMRC refers the case to the District Valuer. Your valuer and the DV will typically negotiate using comps and adjustments. If you sell within the statutory window for less than the probate value, consider a loss on sale relief claim (see reliefs below).
Shares & business assets (SAV)
HMRC refers to SAV. Expect requests for accounts, board minutes, dividend policy, recent deals, and any offers. Explain any minority/marketability discounts and control positions.
- • HMRC correspondence often starts with a questions letter; keep deadlines.
- • Interest runs daily on underpaid IHT until settled; consider payments on account to reduce interest while values are discussed.
- • If agreement can't be reached, ask about ADR before formal appeal.
The Formal Review Process
The first step in challenging an HMRC valuation is to request a formal review. This must be done within 30 days of receiving HMRC's determination notice.
Submit a formal review request within 30 days, clearly stating why you believe the valuation is incorrect and providing supporting evidence.
Submit professional valuations, comparable sales evidence, and any factors that might affect the property's marketability.
HMRC will review your case and either maintain their valuation, reduce it, or request additional information.
Reliefs & corrections
- Loss on sale of quoted shares/securities — if sold within 12 months of death for less than the probate value, claim a refund (IHT35).
- Loss on sale of land — if sold within 4 years of death for less, claim a refund (IHT38).
- Corrective account — use the current HMRC process to amend values if new evidence emerges (e.g., sale price, structural issues found).
Professional Valuations
A professional valuation from a qualified surveyor or valuer is essential when challenging HMRC. The valuation should be prepared specifically for inheritance tax purposes and consider the property's condition at the date of death.
Property Factors
- • Physical condition and defects
- • Location and local market conditions
- • Planning restrictions or opportunities
- • Access and rights of way issues
Market Factors
- • Recent comparable sales
- • Market conditions at date of death
- • Demand for similar properties
- • Economic factors affecting value
When to escalate
If negotiations stall, consider ADR to mediate with HMRC. Failing that, you can appeal to the First-tier Tribunal (Tax). Be ready with your valuation report, comps pack, correspondence trail, and a concise statement of issues.
Tax Tribunal Appeals
If the formal review doesn't resolve the dispute, you can appeal to the First-tier Tribunal (Tax Chamber). This is an independent judicial body that can make binding decisions on valuation disputes.
Appeal Deadline
You have 30 days from HMRC's formal review decision to lodge a tribunal appeal.
Evidence Requirements
Both parties present expert evidence, typically from professional valuers, to support their positions.
Tribunal Decision
The tribunal will determine the correct valuation based on evidence presented. Their decision is binding.
Evidence pack to prepare
- • Full valuation report (RICS Red Book) and comps schedule.
- • Photos/plans, tenancy/occupation evidence (for property).
- • Sale particulars and post-death offers (if any).
- • For shares/business: accounts (3–5 years), forecasts, cap table, any third-party offers, and notes on surplus cash/excepted assets.
- • Copies of the relevant IHT schedules used: IHT404, IHT405, IHT407, IHT410, IHT411/412, IHT413.
Costs and Risks
Challenging valuations involves costs and risks that should be carefully considered before proceeding.
- • Professional valuation fees (£1,000-£5,000+)
- • Legal representation costs
- • Tribunal fees (if applicable)
- • HMRC's costs if you lose at tribunal
- • Time and administrative burden
- • Reduced inheritance tax liability
- • Interest savings on delayed payments
- • Correct valuation for future reference
- • Peace of mind that tax is correct
- • Precedent for similar assets
Alternative Dispute Resolution
Before proceeding to tribunal, consider alternative dispute resolution methods that may be faster and less expensive.
Mediation
A neutral mediator helps both parties reach a mutually acceptable valuation without formal proceedings.
Expert Determination
Both parties agree to accept the decision of an independent expert valuer.
Negotiated Settlement
Direct negotiations between representatives to reach a compromise valuation.
The court process is Confirmation (not probate), but HMRC valuation handling (VOA/SAV, ADR/appeal) follows the same path. Use Form C1 for the inventory where applicable.
Do
- • Respond on time
- • Share your comps
- • Make payments on account if exposure is likely
- • Keep a single point of contact
Don't
- • Rely on a bare figure without methodology
- • Ignore undivided share/minority issues
- • Assume a flat 50/50 on joint bank accounts
When to Seek Professional Help
Valuation disputes can be complex and costly. Consider professional assistance when dealing with high-value assets, complex properties, or when significant tax savings are at stake.