Case Study: Tax Consultancy Review Results in £25,000 Refund

Often a simple tax consultancy overview can result in huge potential benefits to our clients, as was the case with the example below:

We received a telephone call from the daughter of an ex-client.  Sadly her mother had passed away recently, and she was collating paperwork for the solicitor acting for her mother’s estate.

The tax return work undertaken historically by Armstrong Watson related to the sale of 1 acre of development land 3 years ago. The land was sold by her mother, and we were asked at the time to complete a Capital Gains Tax (CGT) calculation. The land in question had previously been inherited by the lady’s mother following the death of her husband 4 years earlier. The probate value was never ascertained, and the husband’s solicitor was fairly relaxed in relation to the value, given it was an exempt transfer to spouse. Evidence existed of a sale of connected land at £50k acre, and although the land in question adjoined a village, planning was only speculative; hence the solicitor used this value for husband’s probate.

 The husband had very few other assets and between the couple their wealth was below £650k. The mother paid a sizeable amount of CGT on selling the land to a developer.

The daughter, on checking her mother’s tax return, spotted the base value used in our calculations had unfortunately been understated in error.  It was in fact recorded at 1/3 of £50k and not £50k. The information from the solicitor was slightly ambiguous; hence the wrong value was used.

On reviewing the case again, following the daughter’s prompt, we were in time to submit a ‘tax overpayment’ claim, however this also provided an opportunity to re-examine the original £50k base cost valuation. The valuation seemed low, with the benefit of hindsight, and we sought professional opinion.  A RICS professional report was able to ascertain that the probate valuation should have in fact been nearer £110k.

As a result of this further investigation by the Armstrong Watson tax team, we were able to submit a tax overpayment claim, requesting the repayment of £25k in wrongly paid tax, with no impact on Inheritance Tax (IHT).