HMRC operates a two-tier system for reviewing inheritance tax returns. Initial assessment falls to trained caseworkers who follow detailed internal guidance when examining submitted valuations. If these officers spot potential issues, the file escalates to the specialist Shares and Assets Valuation team.
When it comes to personal possessions and household chattels, many of these escalations are entirely avoidable. We read the guidance given to caseworkers to understand the red flags they are looking for when valuing personal belongings. Read on to find out more.
1. Submitting Insurance Valuations
Probably the most common error executors make is confusing insurance replacement values with open market valuations. Section 160 of the Inheritance Tax Act 1984 requires assets for probate to be valued at “the price the property might reasonably be expected to fetch if sold on the open market”.
The guidance for HMRC caseworkers specifically mentions that insurance valuations, or valuations prepared on any basis other than the terms of Section 160, are not what is required.
The manual warns that “if you are concerned that the value returned does not reflect the open market value ask SAV for advice” (IHTM21041).
2. Professional Valuations Missing Critical Language
Even professional valuations can fail the HMRC test if they don’t include specific language.
Caseworkers are trained to accept professional reports only when they explicitly confirm that the valuation:
- Uses the date of death as the valuation date
- Has been prepared on an “open market value” basis
and/or
- Complies with Section 160 of the Inheritance Tax Act 1984
HMRC’s own guidance confirms as much: “If the taxpayer has provided a professional valuation of household goods, which states that it has been prepared on the basis of the open market value and/or in in the terms of S160, you will usually be able to accept it” (IHTM21041).
Miss the specific wording they are looking for and you run the risk of your case being referred to the specialist Shares and Assets Valuation team.
3. Overlooking Insurance Schedules
Caseworkers aren’t just looking at your inheritance tax return in isolation—they’re cross-referencing it against available insurance information.
When valuable items appear on insurance schedules but aren’t individually listed on the IHT407 form then alarm bells can start ringing.
The IHT form for household and personal goods (IHT407) specifically requests that any item of jewellery worth over £1,500 is listed individually.
If a £6,000 engagement ring appears on insurance documents but isn’t itemised on the inheritance tax return, this will raise questions.
However, if this wasn’t simply an oversight and the item did go before a professional valuer who determined it was worth less than £1,500 you can rely on them to explain their reasoning to HMRC based on their understanding of current market conditions
4. Post-Death Sale Price Discrepancies
HMRC considers auction results to be the gold standard for market valuation. When items declared at modest values subsequently sell for significantly higher amounts, this can trigger a review.
HMRC’s guidance is explicit about this: “Generally, sales after the death, particularly those at auction, provide the best evidence of the open market value at the date of sale. The taxpayer or agent may be happy to substitute the sale prices for the original valuations or may argue for an adjustment due to market movement between the dates of death and of sale. You should consult SAV (Chattels) if appropriate.” (IHTM21041)
If you consulted a professional valuer before submitting the probate figures then they can readily explain any price variations to HMRC using their expertise in auction markets and buyer appetite, removing the pressure from executors to justify the outcome.
5. Undervaluing Jewellery
Jewellery can be a particular minefield. With current precious metal prices, even modest-looking items can exceed the £1,500 individual declaration threshold.
As mentioned, HMRC expects any item worth more than £1,500 to be listed individually and professionally valued.
Caseworkers are specifically trained to identify potentially undervalued pieces and will have a good idea of the going rate for a gold wedding band in the current market.
Conclusion
The key is to make it easy for HMRC and that starts with giving them exactly what their internal guidance tells them to look for.
A formal valuation of personal possessions represents excellent value for money when compared to the potential costs of HMRC investigations.
Services specifically designed to meet HMRC’s requirements, such as Swift Values, can be the difference between a case being waved through by a standard caseworker versus being escalated to the specialist Shares and Assets Valuation team.
This article was submitted to be published by Swift Values as part of their advertising agreement with Today’s Wills and Probate. The views expressed in this article are those of the submitter and not those of Today’s Wills and Probate.
