UPPER TRIBUNAL (LANDS CHAMBER)	
	
UT Neutral citation number: [2010] UKUT 195 (LC)
LT Case Number: TMA/455/2009

	TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

TAX – inheritance tax – house – value – comparables – HMRC valuation of £475,000 upheld

	IN THE MATTER OF AN APPEAL AGAINST A NOTICE OF DETERMINATION
	OF VALUE UNDER SECTION 221, INHERITANCE TAX 1984

BETWEEN	LESLEY SUSAN HATTON	
	(as Executor of the Will of Ilona Hatton, deceased)	Appellant
	and

	THE COMMISSIONERS OF HER MAJESTY’S	Respondent
	REVENUE AND CUSTOMS

	Re:	22 First Avenue,
	London, 
	W3 7JR

	Before: N J Rose FRICS

	Sitting at Asylum and Immigration Tribunal, 
	15 Breams Buildings, London, EC4A 1DZ
	on 7 June 2010

Mr David Sharron FNAEA, with permission of the Tribunal, for the appellant
Mr Colin Ryder, HMRC Inheritance Tax Appeals Team, with permission of the Tribunal, for the respondent. 

The following case was referred to in argument:

Inland Revenue Commissioners v Gray [1994] STC 360

	DECISION
1.	This is an appeal against the determination by the Commissioners of HM Revenue and Customs, under section 221 of the Inheritance Tax 1984, that the value of the freehold interest held by Mrs Ilona Hatton deceased in a house known as 22 First Avenue, London, W3 7JR (the appeal property) on 27 September 2005, the date of death, was £475,000.
2.	The appellant is Ms Lesley Susan Hatton, the executor of Mrs Hatton’s will.  She contends that the value was £400,000.
3.	The appeal was conducted in accordance with the Tribunal’s simplified procedure.  Mr David Sharron FNAEA, principal of Ravenscourt Residential, estate agents and valuers of London, W12 appeared for the appellant with permission of the Tribunal and gave evidence.  Mr Colin Ryder of HMRC Inheritance Tax Appeals Team appeared for the respondent, again with the Tribunal’s permission.  He called expert evidence from Mr Brian Timmis MRICS, a senior valuer attached to the London Strategy Team of the Valuation Office Agency.  I inspected the exterior of the appeal property and certain comparable properties in the vicinity, accompanied by representatives of the parties, on the afternoon of the hearing.  
4.	From the evidence and my inspection I find the following facts.  First Avenue is a quiet residential road of Edwardian terraced houses, situated just off and to the north of The Vale, Uxbridge Road (A4020) in East Acton in the London Borough of Ealing.  It is a predominantly residential area with good access along Uxbridge Road, east towards Shepherd Bush and Central London and west towards the A40 and the national motorway network.  There are local shops within a short walking distance and Uxbridge Road is well served by local buses.  Shepherds Bush Market (Hammersmith and City line) and Shepherds Bush (Central line) underground stations are approximately seven-eighths of a mile and one and a quarter miles to the east respectively.
5.	The appeal property is a two storey mid-terrace Edwardian house, constructed of solid brick walls and a pitched plain tiled roof.  It has a projecting front gable, providing bay windows to both floors.  There is a small front forecourt and a rear garden, approximately 20 feet deep.  There is no garage and there is on-street parking only, but a service road provides vehicular access to the rear.  The appeal property is one of many similar houses in this and neighbouring roads, although a number have been converted to flats.
6.	At the valuation date the accommodation comprised an entrance hall, sitting room, dining room, kitchen and breakfast room on the ground floor and two double bedrooms, one single bedroom, kitchen, bathroom and separate wc on the first floor.  (The first floor kitchen was subsequently converted to a single bedroom).  There was also an external wc and a small external store.  The property was in reasonable condition but in need of improvement.  The roof was covered with original plain tiles which would require replacing shortly. 
7.	The appeal property was placed on the market by the appellant in the summer of 2007 at £650,000.  An offer to purchase at the asking price was made on 31 August 2007 and the sale at £650,000 completed on 12 November 2007.  The condition of the appeal property in November 2007 was similar to that at the valuation date.  In a letter to the appellant dated 7 April 2008, the new owner stated that, following the sale, £41,350 was spent on works “which were necessary to bring the house to a habitable condition for a young family.” 
8.	Mr Sharron said that the market value of the appeal property at the valuation date was £400,000.  This figure was based on his “hands on local knowledge of property in the area”, and on 25 years experience.  The main comparable sale upon which he relied was that of 5 Agnes Road, which his firm had sold very close to the valuation date for £390,000.  He also obtained support for his valuation from the sale of 10 Second Avenue, which had had two bedrooms created in the roof space and which sold for £500,000 in May 2006 when, said Mr Sharron, values were very much higher than at the valuation date.  Mr Timmis’s valuation of £475,000 was based on sales of six broadly similar houses, all of which were located in either First Avenue or Second Avenue.  They included the appeal property itself and 10 Second Avenue.  Second Avenue runs immediately parallel to and to the west of First Avenue.  The six sales took place between April 2004 and October 2007.  Mr Timmis adjusted the sale prices to reflect movements in the residential property market generally between the dates when he assumed contracts were exchanged and the valuation date.  For this purpose Mr Timmis used the Nationwide House Price Index for Greater London and the Land Registry Index for the London Borough of Ealing.  
9.	Mr Timmis made further adjustments to the sale prices to reflect condition, where it was apparent from the available sales particulars that a property had been improved.  He said that it was difficult to know how well refurbished the properties had been when sold, but for the sake of consistency he had used a figure of £40,000 in each case, being the approximate amount spent on the appeal property following its sale in 2007.  Where necessary he had also made adjustments to reflect the presence of additional accommodation to bring a comparable into line with the appeal property.  
10.	Having seen and heard the two experts giving evidence, I have no doubt that the opinion of Mr Timmis is to be preferred.  This is because, on two occasions, Mr Sharron’s evidence was misleading.  Firstly, he said in oral evidence that he had inspected the appeal property in 2005, shortly after the date of death.  The appellant had asked him to advise on its value with a view to a possible sale.  Mr Ryder pointed out that Mr Sharron had not referred to such an inspection in his written report and it became apparent that there was no reference to 2005 in Mr Sharron’s file.  I therefore asked Mr Sharron to provide the Tribunal and Mr Timmis with copies of an extract from his diary entry for 2005, showing the precise date of his first inspection.  The following day Mr Sharron wrote to the Tribunal.  He said that, after checking through his records, it was clear that he had first inspected the appeal property in May 2007.
11.	Secondly, in his written submission to the Tribunal Mr Sharron referred to 5 Agnes Road – one of his two principal comparables – in the following terms:
“5 Agnes Road also needed refurbishment and offered scope for enlargement, subject to consents.  This semi-detached property was wider and also had the benefit of a larger 60 ft rear garden.”
12.	These observations gave the clear impression that 5 Agnes Road was, if anything, more valuable than the appeal property.  Mr Sharron failed to mention that 5 Agnes Road is a much smaller house.  Mr Timmis pointed this out in his supplementary report.  Mr Sharron agreed that the sales particulars prepared by his firm showed that the net internal area of the appeal property was 28% greater than that of 5 Agnes Road, but he made no attempt to revise his valuation to take the difference in size into account.  He merely observed, after I had raised the matter with him, that values per square foot were always higher for smaller properties and that “I don’t get involved with areas in second hand buildings”.  I regret that I have concluded that Mr Sharron’s presentation of this evidence was intended, not to assist the Tribunal in arriving at the correct value of the appeal property, but to justify a figure of £400,000.
13.	Mr Timmis does not have first hand local knowledge to assist with the valuation exercise.  He was, however, a straightforward witness.  He frankly acknowledged the deficiencies of using indices to arrive at accurate valuations, and the absence of full information about certain of his comparables.  I am satisfied that he has done the best he can with the information available.  In appeals of this nature the onus is on the appellant to prove that the determination of HMRC is wrong.  That onus has not been discharged and the appeal is therefore dismissed.
14.	In appeals conducted in accordance with the Tribunal’s simplified procedure, costs are not awarded except in limited circumstances (Lands Tribunal Rules 1996, rule 28(11)).  If either party wishes to apply for costs they must do so in writing within 14 days of the date of this decision, giving full reasons for their request.  Copies of any such application must be sent simultaneously to the other party, who may make written counter-submissions within the following 14 days.  In the absence of any costs submission being received within 14 days of the date of this decision, the decision will become final.
Dated 23 June 2010

N J Rose FRICS