Valuation at rebasing date

[Nora Kay]

I recently sold a property and sent in a Capital Gains Tax calculation to the tax office, opting for rebasing the value at March 1982. I searched local papers and came across a similar house on the market at that date for £45,000 which I used in my calculation in lieu of the purchase price.
The tax office referred it to the District Valuer, who has come back with a valuation of £16,000, which took into account that the market value would be affected by the fact that the property had protected tenants.
I feel this is very unfair as the property was bought with vacant possession, and at the valuation date of March 1982 it was not actually being sold. If I had intended to sell it then, I would have got vacant possession before putting it on the market - possibly by paying the tenants a sum to move out, in order to get the best price.
Can anyone tell me if the DV is obliged to value the property in this way, or can he be persuaded how unjust this is?

[MrShed]

Well, to be fair, £16000 would have therefore been the market value of the property. IMO its no good saying you would have acquired vacant possession as you have no guarantee or proof that this would have been the case. And would you "offer" to deduct from the new valuation how much you would have spent on acquiring vacant possession? I think not.

You opted for this method, to be fair you probably should have checked into this possibility prior to opting for it. Sorry if this all seems harsh, just the way I see it. That said, I do sympathise.

[Tax Accountant]

Would protected tenants devalue the property by as much as 2/3rds?

How did these protected tenants leave eventually?

Ramnik

[MrShed]

Thats true....I thought id reduced value by around 50%. Having said that, the 2/3rds is based on a seperate property's value.

[Nora Kay]

Mr Shed
No I don't think it is fair to take the tenant's status in to account. The valuation should just reflect the bricks and mortar and situation of the property. Since the property was not actually sold at the rebasing date, it is just an artifice for establishing a value. If I cannot say that the property would or would not have been vacant, but then neither can the DV. So that aspect should be ignored. I remember reading an argument about this in a taxation journal, but I don't remember the outcome. I should like to know if anyone reading this has managed to persuade a DV to ignore protected tenancies.
Karongo
The protected tenants left of their own accord over the years as they moved on. I can only assume from the DV's figure of £16,000 that he valued it first at £32,000, then deducted 50% to reflect the assumed protected tenancies.
Another thing that bugs me is that although the property was owner occupied for some time after the date of purchase, the Revenue do not allow the Private Residence Relief if the owner occupied period was before the rebasing date.

[Tax Accountant]

Nora Kay,

That would be having your cake and eating it. The rebasing eliminates all your gains prior to the rebasing date. Therefore, you cannot additionally also expect PPR relief for the period of occupation prior to the rebasing date.

But you do have the benefit of the lettings relief if it was also let at some point in time in your ownership.

Ramnik

[Nora Kay]

Karongo,
Thank you for your reply.
After having my CGT computation torn to shreds by the tax office for lack of receipts for eg new roof, new window, (all work done over six years ago, so receipts had been ditched but the evidence for a new roof is on top of the house!) , and also by the DV giving an incredibly low valuation, I feel that I have neither had nor eaten my cake!!
The rebasing exercise may reduce the gains prior to the rebasing date to nil, but I really don't think it should eliminate the PRR which is a different element of the calculation.
I still haven't had an answer to my original query - has anyone successfully appealed against the market value at rebasing date being lowered because of the tenancy situation?

[MrShed]

Ah, but Nora Kay the DV CAN prove whether the property would have been occupied or not, as it WAS at the time. As I said before, you knew the property was occupied at the date you had the rebased value on, and so should have at least looked at the possibility of this occuring. I'm not saying its fair, its not, but you cant really fault their logic.

As for the appeal question, why not try it, see what happens!

[Nora Kay]

Mr Shed
We would have to go to a pub with extended opening hours before we could agree on this one! When did "was" equate with "would have been" ??
More bizarrely still, I have found online from the voa website the definition of the basis of valuation as at 31/3/1982, I quote
" it shall be assumed that on that date, the asset was sold by the person making the disposal and immediately re-acquired by him at its market value on that date".
So there I am in my 2 guises, half of me saying I'd better sell with vacant possession to get a good price, the other half saying No! just let me have it at a pathetically low price with the tenants on board. That just adds nothing to understanding what was originally intended when the legislation was drawn up. :(
I have presented 2 appeals in the past on different matters, and found them very time consuming, longwinded and mentally exhausting. I was hoping to get an answer here as I really have no inclination to repeat the experience.
I've written to the DV with my objections, and will just have to await his decision.

[Tax Accountant]

Await DVO reply with bated breath.

Ramnik

[Nora Kay]

Just had a reply from the DVO. He won't budge on the with/without vacant possession position. He valued the property at £40,000 then deducted 60% on account of the protected tenancies. 60%! I've asked him to adjust the value up to £45,000 and deduct only 50% as the house was in a sought-after area and would have/could have/should have attracted several buyers.
He might just budge on this as at the end of the day it is all guesswork since the property was never put to the market on rebasing day.
It looks like I'm in for another big bill whichever way it goes.

[Nora Kay]

For anyone who is interested, the DV continued to argue his case, but finally agreed to raise the rebased valuation from £16,000 to £20,000, - :o not that he agreed with my figures, but rather that he wanted to close the case! I had almost decided to cave in but then thought I would send one more letter reiterating my arguments. At least I had the satisfacion of getting him to move a small way in my direction. :o

[Tax Accountant]

Well done Nora.

Valuation and many other matters are not an exact science. So many things are concluded by negotiation when both parties reach settlement which they both find acceptable. The only other recourse would have to go to a tribunal and that involves a lot of time and effort. The end result is also not guaranteed.

On a slightly different note, I recently appealed against a planning application refusal by a local authority officer and found that he had made so many assumptions and even told lies and half-truths to the planning inspector. With carefully argued case on technical as well as practical points, The planning inspector threw out the council officer's case and allowed my appeal in full. This was my first attempt at a planning resusal appeal and I learnt a lot along the way.

Ramnik

[Nora Kay]

Thank you Karongo!
I've had a few cases recently where "that last letter" just did the trick - I got my house rebanding for Council Tax put down a band; I had compensation paid for loss of food due to failure of a year-old freezer, although the manufacturer said intiially they needed to see receipts which I didn't have; and then Powergen finally admitted they may have made an error in the labelling of meters!!
Everything coming up roses!

[Tax Accountant]

Persistence quite often helps, especially if you research the subject as much as possible beforehand and argue your point with some merit.

Ramnik