Foster v HMRC [2020] WTLR 145

WTLR Issue: Spring 2020 #178





Susan Elizabeth Foster (“Deceased”) owned 6.39 acres of agricultural land at Wolverhampton Road, Shifnal, Shropshire (“Site”). In March 2004 she entered into a joint venture agreement (“JVA”) with a developer who already owned adjoining land known as the Uplands just outside the defined development boundary of Shifnal. The site, which was located outside the boundary as defined in the local plan proposals map, was shown as “safeguarded land” (i.e. land removed from the green belt and identified as having the potential to meet future development needs beyond the plan period). The Deceased died on 26 August 2013 and a dispute arose between the Appellant, who was her executor, and the Respondent as to the open market value of the site for inheritance tax purposes. At that date, the local planning authority had recently granted outline planning permission for a residential development on a nearby site of safeguarded land outside the development boundary. Two planning applications, which had been submitted but not determined at that date, were subsequently granted permission. Two further planning applications (including the Uplands), submitted after the valuation date, were granted permission. As the local planning authority did not have a five year supply of deliverable housing sites at that time, the local plan policies were deemed to be out of date and in those circumstances a tilted balance or presumption in favour of sustainable development applied. However, there were access and ecological constraints. The parties’ respective valuation experts took fundamentally different approaches to calculating the open market value of the Site. The Appellant’s expert applied a “bottom up” valuation approach based on an analysis of four comparable sales of relatively small parcels of land, concluding that a hypothetical purchaser would view it as strategic land with only a remote prospect of achieving planning permission in the short to medium term. He adopted £20,000 per acre giving a value for the Site of £128,000. The Respondent’s expert adopted a “top down” valuation approach, the starting point of which was the assessment of the value of the Site assuming it had residential planning permission for 50 dwellings at the valuation date. Having analysed and adjusted sales of comparable development sites he adopted £445,000 per acre giving a value for the Site of £2,843,550. From this he made deductions for access risk (40%) and for planning risk and deferment (50%), giving a rounded open market value for the Site of £850,000. It was not possible to resolve the valuation dispute and the Respondent issued a notice of determination on 5 July 2017. Following an unsuccessful review, the Appellant appealed against the determination on 10 May 2018.

Held (allowing the appeal in part)

There was no doubt that at the valuation date a hypothetical purchaser would have considered there to be a reasonable prospect of obtaining planning permission for the residential development of the Site in the short term having regard to the local planning authority’s lack of a five year housing land supply and the tiled balance in favour of sustainable development, knowledge of the existence of the JVA and indications that the authority considered the Site suitable for sustainable development in conjunction with the Uplands. Consequently, it was not accepted that the Site only had a remote prospect of obtaining residential planning permission in the short term. In the circumstances, a “top down” valuation approach was preferable given the statutory requirement to assess the open market value assuming an unconditional sale. The starting point therefore was to value the Site with planning permission using reasonable comparables including the sale of the adjoining land at the Uplands. Based on the same density of housing per acre as that in the Uplands, this would give 7.2 houses per acre or a total of 46 houses for the Site and adopting the same figure of £53,000 per dwelling as was obtained from a sale of the Uplands this would produce a value for the Site with planning permission of £2,438,000. A discount of 80% would have to be applied by way of total risk adjustment factor comprised of 50% for access and 60% for planning. Once this had been factored into the calculation, the open market value of the Site at the valuation date was determined at £590,000.

JUDGEMENT Introduction [1] The appellant, Mr Simon Foster, is the executor of the estate of Susan Elizabeth Foster, who died on 26 August 2013. At the date of death her estate included 6.39 acres of unregistered freehold agricultural (pasture) land at Wolverhampton Road, Shifnal, Shropshire, TF11 9HA (“the Site”). There was a dispute between the …
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Counsel Details

Counsel David Taylor (Charter Chambers, 33 John Street, London, WC1N 2AT, tel 020 7618 4400, email instructed by mfg Solicitors (56 St Paul’s Square, Birmingham, B3 1QS, tel 0121 2367388, email for the appellant. Mark Westmoreland Smith (Francis Taylor Building, Inner Temple, London, EC4Y 7BY, tel 020 7353 8415, email instructed by HMRC Solicitors’ Office (100 Parliament St, Westminster, London SW1A 2BQ, tel 0300 200 3300) for the respondant.

Legislation Referenced

  • Inheritance Tax Act 1984
  • Inheritance Tax Act 1984, s160
  • Inheritance Tax Act 1984, s221
  • Inheritance Tax Act 1984, s222
  • Planning and Compulsory Purchase Act
  • Planning and Compulsory Purchase Act, s39