Palliser v HMRC [2018] UKUT 71 (LC)

WTLR Issue: Spring 2018 #171





The appellant, Mr Palliser, disputed the valuation, for inheritance tax purposes, of a property in which his father’s estate owned an 88.4% share in the long leasehold and a third of the freehold title of the building it which it is located. HMRC had determined that the market value of the estate’s share at the date of the deceased’s death was £1,829,880. This determination was subsequently upheld; Mr Palliser appealed against those decisions, and submitted that the correct valuation should be £1,113,840.

The principal matter in issue was the correct interpretation of s.160 of the Inheritance Act 1984, which defines market value as “the price which the property might reasonably be expected to fetch if sold in the open market at that time”. In particular, the parties and their experts disagreed as to whether the valuation should consider ‘hope value’ – i.e. the value that the property could have if possible development works were undertaken, but before planning permission has been granted. HMRC’s expert considered that there was potential to develop the property and increase its floor space; his valuation took into account this possibility.

Mr Palliser’s expert contended that, as a matter of fact, there was no possibility of extending the property, but even if there was, the correct approach to valuation was to consider the property in its actual state on the date of death, and therefore not to include any hope value that would arise from any potential development in the future.

As a separate head of appeal, Mr Palliser also contended that there should be a 10% discount to reflect the fact the estate’s interest was an undivided share in the property. This was accepted by HMRC.


1)It was appropriate to include ‘hope value’ when determining the value of a property for the purposes of s160 IHTA 1984. This is one facet of a property’s value that a buyer will consider when making an offer to purchase a property.

2)On the evidence, there was potential for extending the floor space of the property.

3)The appeal was upheld in respect of the 10% discount for the estate’s undivided share.

4)Taking all of this into account, the proper value of the property was £1,603,930.

5)As this matter proceeded under the Tribunal’s simplified procedure, and neither side had acted unreasonably nor were there any exceptional circumstances, there was no order as to costs.

[1] This appeal concerns the deemed disposal for the purposes of Inheritance Tax of an 88.4% share in what the parties describe as the freehold interest 1 in a maisonette known as 12B Wedderburn Road, London NW3 5QG (‘the Property’) that was owned by Mr Arthur Palliser who died on 19 June 2012 (the valuation …
This content is only available to members.

Cases Referenced

Legislation Referenced

  • Inheritance Tax Act 1984, ss. 160, 221 and 222