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Valuing assets upon death

11th August 2023

The sad passing of a tenant can indeed be a very emotional time for all concerned. There are a huge number of issues to be dealt with and most particularly making sure all assets are appropriately valued.

Secure agricultural leases, along with interest in tenant’s improvements, are now commanding significant values.  The lease itself could indeed be the primary asset of the tenant’s estate and accordingly any value needs to be properly assessed. The one advantage of doing this properly is that the lease can pass to the next generation at quite a high base value which is extremely advantageous for capital taxation purposes if indeed the lease is relinquished down the line.  The primary advantage is that, on passing, the value, at the present time, can pass to the next generation without any tax payable if advantage is taken of the release currently available. 

As with all assets the valuation needs to be undertaken carefully.  The valuation will, in all likelihood, attract the attention of the District Valuer so a proper assessment needs to be undertaken. The formal valuation process should be under the RICS Red Book Valuation Standards which involves quite a lengthy report and clearly set out methodology.  As a general comment, the methodology of the valuation will follow the methodology for the relinquishment valuation process for the secure tenancy. This involves considering, first the vacant possession value of the farm, considering the investment value to calculate the vacant possession value which is then split and then improvements need to be taken account of. 

Whilst this all sounds quite simple the valuation process will be a necessary evil.  Whilst there is some cost involved, it should be recognised there are very significant potential taxation savings down the line.  Whilst the passing of the tenant is a very sad time, the silver lining under the dark cloud can be that there are some positives to come out also.

Tom Oates
07785 926 306