Who Owns IHT100 Calculation - Client or Accountant

Different Accountants have Difference of Opinion on Unquoted Share Valuation for IHT (IHT100/IHT400)

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Trust owns 49% of the issued shares (the B shares) in an unquoted family investment company, settlor and wife own the other 51% (the A and C shares, all shares ranking pari passu). Company holds quoted investments, cash at bank and freehold property all worth around £3 million.

2023/24 ten year IHT anniversary IHT100 completed for unquoted B shares held in family investment company. Accountant A (the company's adviser) muscled in and dealt with the IHT100 and share valuation and valued the trust shareholding at approximately 50% of the full 49% market value of the company. In other words Accountant A put forward a low valuation and did not disclose how he arrived at his valuation. HMRC did not query this valuation and issued an IHT 309 Calculation of Inheritance Tax assessing the share value put forward by Accountant A.

The settlor died six months later on in the 2023/24 tax year. His estate, and his A shares, all go to his wife. Accountant A (the company's adviser) suggested to the solicitor that solicitor should adopt the same share valuation basis for death as was used for the 10 year IHT charge. The solicitor said his specialist valuer, Accountant B (who is a very highly recommended valuation expert), advised a much larger death IHT share value was achievable, which would also be very beneficial in the long term for the surviving widow and her own CGT.

At a guess I would reckon Accountant A has charged £3,500 for the IHT100 work and share valuation whereas specialist Accountant B will charge around £7,000.

Accountant B wants to get his hands on Accountant A's IHT share valuation calculations, but Accountant A says he cannot have them because they belong to Accountant A, even though the work was paid for. This is frustrating Accountant B, and he wants to avoid any embarrassment caused by him putting forward a larger valuation which contradicts that put forward to Accountant A, especially with the 10 year IHT charge being so close in time to the death of the deceased settlor.

I suspect Accountant A is being cagey in case his methodology is laughed at by Accountant B, or maybe worse, Accountant A's work is called into question. But, is it not all a matter of professional opinion, and that will differ.

No one has seen any of the share valuation calculations prepared by Accountant A. The surviving trustees (wife and daughter) signed the IHT100 without seeing the detailed share valuation calculations.

I am caught as "pig in the middle". So, my own questions (as accountant for the settlor, wife and daughter) are:

1) does the client (the remaining trustees) own the share valuation work done by Accountant A. If so, can they compel Accountant A to release all of those workings.

2) because HMRC have assessed Accountant A's share valuation figure without query, what will happen if the IHT400 death form puts forward a much higher share value. Can HMRC now recalculate the IHT100 tax calculation if there has been a serious undervaluation for the 10 year charge.

3) Why on earth did HMRC not query the IHT100 10 year anniversary share valuation. Surely HMRC should have got Shares Valuation Division involved. What powers do HMRC have to reopen the 10 year IHT valuation if a bad valuation has occurred.

4) Have HMRC "ascertained" the value for IHT purposes if HMRC do not dispute the value.

5) Can Accountant A completely refuse to reveal their calculations. The trustees have effectively paid for this work.

Any helpful comments would be appreciated.

 

 

 

 

 

 

 

Replies (3)

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By FactChecker
27th Feb 2024 21:40

Thoughts/opinions only ...

* The problem starts with "The surviving trustees (wife and daughter) signed the IHT100 without seeing the detailed share valuation calculations" ... presumably an indication that they didn't take any great interest in any of the other figures either, despite being 'responsible' for them and putting their signature to them.
Not uncommon - but it can lead to exactly this sort of situation.

Reverting to your specific questions:
1. Assuming you mean legally and not morally, it probably depends on the LoE. Would you, in your normal course of business, consider your 'working papers' as belonging to you or to your client (it used to be a regular question on here)?

2. Who knows "what will happen" (this is HMRC you're talking about) ... but I'd be surprised if they can't reconsider their earlier 'acceptance' (as with any other tax).

3./4./5. I cease to have opinions once we enter the land of "why on earth .." and "surely ..".

But, unless I'm missing the point, you seem to be wandering outside your remit.
You weren't appointed by the Trust to administer and make returns for it ... you're appointed by the Estate and the beneficiaries (by the sound of it) to sort out the Estate at death and any resultant IHT etc.
It is not in your power (even if possible or desirable) to re-submit the IHT100 ... so all you can do is to suggest to the trustees that they may wish to consult Accountant A about the possibility of such a re-submission (which will probably not go down well with A and likely cost the ex-trustees a fair bit - and I'm not sure that you can do even that unofficially).

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By Tax Dragon
28th Feb 2024 07:33

I very much doubt that any enquiry windows have closed. We're still in 2023/24, afaiaa.

But I agree with the first response. As you often seem to be, you are "in the middle" trying to resolve issues that are not your place to resolve.

Thanks (3)
paddle steamer
By DJKL
28th Feb 2024 09:43

The problem started by someone paying the fee to Accountant A for his valuation work without first obtaining a copy of that valuation and its workings.

Money tends always to be the strongest lever, never part with it until you have all that you need re information.

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