Incorrect Probate Valuation — How to Amend the Value

Yes. A probate valuation is not fixed once it has been submitted, and it can be amended both before and after the Grant of Probate has been issued. Where an Inheritance Tax account has already been delivered to HMRC and you later discover it was defective in a material respect, correcting it is not simply permitted — section 217 of the Inheritance Tax Act 1984 requires a further account to be delivered within six months of the discovery.

It is worth being precise about what is being corrected. Amending a probate valuation does not mean revaluing the asset at today's prices. The figure remains the Open Market Value at the date of death; you are replacing an unreliable or mistaken figure for that date with a better-evidenced one for the same date. A house that has risen in value since the death has not been incorrectly valued — the estate simply owns an asset that is now worth more than it was.

Most corrections are administrative rather than contentious. Executors discover a dormant account, realise an insurance schedule was copied into the estate figures, or receive a professional report that supersedes an early estimate. HMRC has a standard mechanism for exactly this, and the tone of the correspondence matters far less than two things: that you report promptly once you know, and that you can show how both the original and the corrected figure were arrived at.

Valuation errors in estates are rarely the result of carelessness in any ordinary sense. They usually happen because a figure prepared for one purpose was used for another, or because nobody in particular was responsible for producing it.

The pattern running through nearly all of them is the same: a number that looks authoritative, but which was produced on a different basis, at a different date, or by nobody with the relevant expertise. None of these is a scandal, and all of them are fixable once identified.

These are the causes that come up most often:

Before starting a correction, establish whether there is genuinely an error. A number of situations look like an incorrect probate valuation but call for something else entirely — and using the wrong remedy can cost the estate money or create work that was never needed.

The distinction that matters most is between a figure that was wrong at the date of death and a value that has changed since. Only the first is a valuation error. The second may still produce a tax saving, but through a relief rather than an amendment.

Errors caught before the Grant of Probate is issued are the least troublesome, and the practical steps depend on how far the paperwork has travelled.

If nothing has yet been submitted, there is nothing to correct in any formal sense. Update your working figures, keep a note of why the earlier estimate was superseded, and carry the corrected number through to the account and the probate application. This is the reason it pays to gather valuations early rather than filling in forms from memory and hoping to tidy up later.

If an IHT400 has been delivered but the grant has not yet been issued, write to HMRC's Inheritance Tax office quoting the deceased's name, date of death and the HMRC reference, setting out the original figure, the corrected figure and how you reached it. Do this before the grant issues if you can: it is simpler to correct an account under consideration than one that has already been settled and acted upon.

If a probate application has already gone to HMCTS with figures you now know to be wrong, contact the probate service as well as HMRC. The grant records the gross and net value of the estate, so a material change may affect what should appear on it.

One category deserves particular attention. If the corrected figures take an estate outside the excepted estate conditions — so that it should have been reported on a full IHT400 rather than through the probate application — a full account is needed within six months of discovering that fact. This catches executors who find a substantial asset late in an estate that had looked comfortably straightforward.

Where the correction increases the tax and the six-month payment deadline has already passed, pay the additional Inheritance Tax as soon as you can quantify it, even if the formal paperwork follows afterwards. Interest runs from the original due date, not from the date you discovered the error, so a payment on account stops the meter while the correspondence is resolved.

Where an IHT400 has been delivered and the grant has been issued, the standard route for amending the figures is HMRC's corrective account, form C4. It is used to report changes to what was originally declared: revised values, assets discovered after the account was submitted, assets that turn out not to have formed part of the estate, changes to liabilities, and changes to the exemptions or reliefs claimed.

In Scotland the equivalent is a corrective inventory, form C4(S), and where the confirmation figures change the corrective inventory may also need to go to the sheriff court as well as to HMRC. Estates in Northern Ireland follow the IHT400 and C4 route. HMRC's forms and submission channels have been moving online in recent years, so check the current route on GOV.UK before posting anything.

On timing, two rules pull in different directions and both need respecting. Section 217 sets the outer limit: a further account within six months of discovering that the original was materially defective. Set against that, HMRC would generally rather receive one complete corrective account than a series of small ones, so executors commonly gather the amendments together before submitting. Gathering amendments over a few weeks is sensible; sitting on a known material change for a year is not.

Whatever channel you use, the substance is the same. State the deceased's name, date of death and the HMRC Inheritance Tax reference. Identify the asset precisely. Give the original figure and the corrected figure. Explain how the corrected figure was reached, and attach the supporting evidence — the valuer's report, the auction result, the bank's date-of-death balance, the completion statement. An amendment supported by evidence is a routine adjustment. An amendment that simply asserts a new number invites questions.

Excepted estates sit slightly differently. Because no IHT400 was delivered, there is no account to correct in the C4 sense. If the corrected values keep the estate comfortably within the excepted estate conditions and no tax is affected, record the change carefully in the estate papers. If they do not, deliver a full account within six months of the discovery.

Do not apply for a clearance certificate on form IHT30 until you are confident the figures are final. Clearance is useful, but it does not protect a personal representative where material facts were not disclosed, and it can be reopened if the estate subsequently changes.

The sequence below keeps the correction orderly and, just as importantly, keeps the evidence of reasonable care in one place. Work through it in order rather than starting with the letter to HMRC.

An undervaluation that changes the tax position has three possible consequences: additional Inheritance Tax, interest, and — only sometimes — a penalty. It is worth separating them, because executors often assume the third follows automatically from the first.

The additional tax is simply the tax on the corrected value, payable by the estate. Interest runs from the original due date, which is the end of the sixth month after the month of death, and not from the date the error came to light. An error discovered eighteen months after death therefore carries roughly a year of interest even though it was reported the week it was found. HMRC's interest rate changes, so check the current published rate rather than relying on a figure quoted in an article.

Penalties are behaviour-based. HMRC asks what the personal representative did, not whether the number turned out to be right:

Within each behaviour band, the penalty is reduced according to the quality of the disclosure — how promptly you tell HMRC, how fully you explain what went wrong, and how far you help HMRC quantify it. The largest single reduction turns on whether the disclosure is unprompted, meaning made before you had reason to believe HMRC had discovered or was about to discover the error.

In practice this means an unprompted, well-evidenced correction of a careless error can attract no penalty at all, while the same error disclosed after HMRC opens an enquiry will not. This is the strongest practical argument for reporting a suspected error as soon as you have established it, rather than waiting to see whether anyone notices.

Waiting is not a strategy in any event. HMRC can generally raise a determination within four years of the tax becoming due, extended to six years where tax was lost through careless behaviour and twenty years where the behaviour was deliberate or where no account was delivered at all. An unreported undervaluation does not quietly expire on the estate's preferred timetable.

Documented reasonable care is what keeps a correction in the first row of the table above. A written valuation from someone with relevant expertise, an inventory, photographs and a note of the reasoning behind each estimate are what reasonable care looks like on paper when the question is asked two years later.

Overvaluation attracts less attention than undervaluation, because HMRC has no reason to query a figure that produces more tax. That does not make it harmless. Where the estate is taxable, an overstated asset means the estate paid Inheritance Tax it never owed, and the money only comes back if someone asks for it.

The correction route is the same corrective account. A claim for repayment of overpaid Inheritance Tax generally has to be made within four years of the later of the date the tax was paid and the date it became due, under section 241 IHTA 1984, so an overvaluation is not something to leave until the administration is otherwise finished. Check the current limit before relying on it.

A separate mechanism applies where the value was right at the date of death but the asset subsequently sold for less. This is not an amendment and should not be reported as one. Where qualifying investments — broadly, quoted shares and securities, unit trusts and open-ended investment company holdings — are sold within twelve months of death at an overall loss, relief can be claimed on form IHT35. Where land or buildings are sold within four years of death at a loss, relief can be claimed on form IHT38. In both cases all the relevant sales made by the same appropriate person in the period are brought into account, so a gain on one sale can cancel out a loss on another, and the arithmetic is worth doing before deciding whether a claim helps.

These reliefs interact with the estate's capital gains position, and the better route is not always obvious from the Inheritance Tax figures alone. Where the sums are significant, take advice before choosing between a corrective account and a loss relief claim.

Where no Inheritance Tax is payable at all, an overstated value costs the estate nothing in tax. It may still cost time, by pushing a straightforward estate towards a reporting route it never needed. And it has one genuine advantage, which is the subject of the next section.

The probate value does a second job that executors frequently overlook. Under section 62 of the Taxation of Chargeable Gains Act 1992, personal representatives and beneficiaries are treated as acquiring the deceased's assets at their market value at the date of death. That figure becomes the base cost for Capital Gains Tax on any later sale.

The consequence is symmetrical, and it is the reason an undervaluation is rarely a saving even when HMRC never queries it. A low probate value reduces the Inheritance Tax on the estate but increases the chargeable gain when the asset is sold, because the gain is measured from that lower starting point. Where the estate pays no Inheritance Tax at all, a value pitched too low is simply a future Capital Gains Tax bill with no offsetting benefit.

Nor can the two figures be chosen separately. Where Inheritance Tax was chargeable and the value was ascertained for Inheritance Tax purposes, section 274 TCGA 1992 ties the Capital Gains Tax base cost to that ascertained figure. A low value declared for Inheritance Tax cannot be quietly replaced by a higher one when the asset is sold.

Where no Inheritance Tax was payable, values are generally not ascertained in that technical sense, but the base cost must still be a genuine market value at the date of death and HMRC can challenge a figure that was never properly established. For an estate below the thresholds that expects to sell a property or a valuable chattel, a properly evidenced valuation is the practical protection — evidenced, not inflated. The obligation in both directions is to report the real Open Market Value, and the tax consequences are a reason to get the figure right rather than a reason to choose a number.

Rates, allowances and reporting deadlines for Capital Gains Tax change regularly, particularly for residential property. Check the current position on GOV.UK, and take advice where a sale is likely during the administration.

The prospect of personal liability worries executors more than almost anything else in an estate, and the anxiety is usually out of proportion to the risk. It deserves a calm and accurate answer rather than either reassurance or alarm.

The starting point is that additional tax, interest and penalties are liabilities of the estate. A personal representative's liability for Inheritance Tax is generally limited by section 204 IHTA 1984 to the assets they received or would have received but for their own neglect or default. So long as estate assets remain in your hands and you deal with the correction properly, the estate pays.

The point where that protection weakens is distribution. If an estate has been distributed and the tax then turns out to be higher, you are left recovering money from beneficiaries who may already have spent it — and the shortfall does not disappear because recovery is awkward. This is why the standard advice is to hold back a reserve, and not to make a final distribution while a valuation is genuinely in doubt or an enquiry is open.

Reasonable care is the substance of the defence. Instructing someone with relevant expertise where an asset warranted it, keeping the evidence, and acting promptly once an error came to light are the things HMRC looks at. None of them requires the original figure to have been correct.

Two limits are worth stating plainly. A clearance certificate on form IHT30 does not protect against facts that were not disclosed. And a professional valuation is evidence that care was taken; it does not transfer the personal representative's responsibility to the valuer, and it does not guarantee that HMRC will accept the figure. Where a report was prepared on the wrong basis or was plainly deficient, the estate may have a separate claim against the professional concerned, but that is a different question from the estate's tax position.

Where the estate is substantial, the error is large, or an enquiry has already been opened, take advice from a probate solicitor. That is not a step to economise on, and the cost is an administration expense.

A retrospective valuation assesses what an asset would have fetched on the open market at a specific past date, using market evidence from that period rather than today's prices. For a corrected probate figure, this is what is needed: a valuation as at the date of death, prepared now.

A retrospective valuation earns its cost in a fairly narrow set of circumstances. It is worth commissioning where HMRC or the Valuation Office Agency has queried a figure, where the original was prepared on the wrong basis, where the sums involved are large enough that a difference of opinion matters, or where beneficiaries are in dispute about what an asset was worth.

It is not always the right answer. Where an item sold at open auction shortly after the death, the hammer price is usually better evidence of Open Market Value than a retrospective opinion, and the sale documentation is what HMRC will want to see. Where the correction is an omitted bank account or an arithmetic slip, no valuation is needed at all. And for modest household goods, a proportionate estimate with a note of the reasoning behind it remains appropriate.

On cost, one point should be stated clearly because it is widely misunderstood. Properly incurred valuation fees can ordinarily be paid from estate funds as an administration expense, but they cannot be deducted from the estate value when calculating Inheritance Tax. HMRC's IHT400 notes exclude the costs of dealing with the estate. Correcting a valuation is worth doing on its own merits; it does not reduce the tax bill by the amount of the fee.

The work can usually be done even where the items have been sold, distributed or given away, provided enough descriptive evidence survives — valuers regularly work from photographs and documentation. What makes the difference is the quality of what you can hand over:

If you suspect a figure in an estate is wrong, three actions cover most of the ground and none of them takes long.

First, write down what you actually know: which asset, what figure was reported, where that figure came from, and what has now come to light. A great deal of executor anxiety turns out, once written down, to be a question about one asset rather than a problem with the whole estate.

Second, establish the correct figure before you write to HMRC. Whether that means a bank statement, an auction result or a retrospective report from a specialist, a correction that arrives with its evidence attached is a routine adjustment rather than the opening of an enquiry.

Third, report it within six months of the discovery, and pay any additional tax as soon as it is quantified. Prompt, unprompted and evidenced is the combination that keeps a correction inexpensive.