The balance sheet is your main source of information about the
value of the business assets and liabilities at the date of
death/transfer. You should consider each item shown in the balance
sheet and decide whether it warrants further investigation. You can
call on specialist branches, such as the Valuation Office (VO) (
IHTM23002), to help where necessary.
You should indicate that you have checked the balance sheet
by ticking through the details shown when you are satisfied with
the values offered.
In most cases you will check through the business assets and
liabilities and ensure that the open market value is included. In
this way you are simply valuing the assets of the business on the
assumption that it came to an end on the deceased's death. Some
businesses, however, are sold as a going concern and the sale value
may be offered as the date of death value. If the parties object to
an asset valuation or offer the sale value as a going concern,
refer the case to your manager for advice.
Sale values of individual assets can normally be accepted
(subject to any checks, e.g. in respect of realty) if the sale took
place shortly after the death.
Freehold and Leasehold Property
Refer the values noted to the VO in the normal way. If
agricultural relief has been claimed send form IHT414 (
IHTM24255) unless this has already been
done, and see if relief is due before referring the papers.
Most businesses require premises from which to operate. It
may of course operate from rented property in which case you would
expect to find a deduction for rent in the profit and loss account.
In such cases details of the tenancy should be obtained as it may
have a capital value which should be included as an asset.
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
Fixed Assets
Fixed assets can include plant and machinery, motor
vehicles, office and business equipment, fixtures and fittings.
Again it is your job to ensure that the values shown
properly reflect open market values. The figure shown is usually
the cost less depreciation.
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
Current Assets
In most cases you can accept the figure shown because it
shows what those assets cost to purchase or their current market
value.
In farming cases which include livestock, refer the case to
Shares and Assets Valuation (SAV)(Livestock) for them to consider
the value offered. If land is the current asset then a reference to
the VO is required.
It should be possible from most balance sheets to compare
the current year's figures with the previous year's. This should
help you decide if the current figures look odd in any way. Certain
businesses show large changes in current asset values, e.g. stamp
dealers, car traders, antique and art dealers.
This reflects the amount of money owed to the business.
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
This is the value of crops growing on the land at the date of
the balance sheet
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
When the VO values agricultural land, the growing crops are
excluded from the valuation.
These represent cash paid for insurances, rent, business rates
etc. for a period not covered by the current accounts.
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
In farming cases tenantright is the amount due from the landlord
to the farmer for improvements made to the landlord's property.
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
If a tenancy is shown you should consider if there was a
potentially exempt transfer or gift with reservation on the
granting of the tenancy.
Stocks and shares will be investigated by FACET or SAV as
appropriate once full details have been obtained.
Bank and Building Society accounts will be included at their
capital value, any interest will be shown in the profit and loss
account.
You should check if there are any investments which were not
used in the business (
IHTM25341).
You will rarely find a value for this shown in the balance sheet
simply because a calculation of its value is not required until the
business as a whole is being valued.
No goodwill exists for farming or NHS medical practices.
Refer the investigation of goodwill to SAV (Goodwill).
When referring the case you should state the type of business
involved as different SAV teams specialise in different types of
business.
In some businesses "inherent" goodwill is attached to the
real or leasehold property used in the business and the VO will
include its value in the value of the property. In the following
cases the valuation of such goodwill is conducted wholly by the VO:
The valuation of any other goodwill element in respect of the
above businesses is for SAV.
Liabilities
Ensure that the amount shown accurately reflects the sum
outstanding at the date of death and see if there was a mortgage
protection policy if worth.
In cases where only part of the business land (
IHTM25354) qualifies for business
relief ensure that the mortgage is apportioned, if necessary,
between all the properties on which it was charged and, where only
part of a single property qualifies, between the relievable and
non-relievable portions.
These are the sums owed by the business. The provisions of
IHTA84/S162 have to be satisfied before a deduction is allowed.
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
There has to have been a contract of employment (which need not
have been in writing) before this can be allowed.
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
This refers to the amount taken out of the business by the
deceased, usually for ordinary living expenses.
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
These are personal not business liabilities and if the amounts
are large you should exclude them from the accounts and deduct them
instead from the value of the non-instalment property.
