What is the Worth of a Red Book Valuation?

Reliable valuations are crucial to understanding the value of one’s assets and they have become even more essential following October’s budget and proposed IHT changes to Agricultural Property Relief and Business Property Relief. We are often asked by clients why a formal ‘Red Book’ valuation is required, rather than simply a market appraisal.

Put very simply; a Red Book valuation is a formal opinion of value that can be relied upon by the instructing party. A market appraisal is an informal opinion on a suitable guide price for a property or asset and is generally given by estate or land agents in the hope of being instructed to sell a property. It is worth bearing in mind, that sometimes the price that agents provide can be intended to secure them the sale, and won’t take into account the large range of factors affecting value that a Red Book Valuation covers.

The key difference between them is that a Red Book valuation is governed by strict professional valuation standards set out in the ‘RICS Valuation Global Standards’ (and its supplements), which is commonly known as the ‘Red Book’, laid down by the Royal Institution of Chartered Surveyors (RICS). Only a RICS Chartered Surveyor, with the additional qualification of being a registered valuer can carry out a Red Book valuation and the Global Standards ensure that high levels of inspection, investigation, analysis, definitions, justification and presentation are met.

If a valuation is required, in most circumstances, it will need to be a Red Book valuation as there are only a few exceptional circumstances where it is not required. Some examples of where a Red Book valuation would be required are: for tax purposes (e.g. tax planning / probate / capital gains tax), transferring assets, Divorce proceedings, or other legal court proceedings, disputes being resolved through mediation or arbitration and loan security to name a few. Essentially, a ‘Red Book’ valuation is required whenever a value is to be relied upon.

Valuations for tax purposes are particularly pertinent at the moment, given the changes proposed by October’s budget to inheritance tax. Farmers and landowners need to know the value of their assets so that they can begin to plan a strategy for the future. Valuations will now not only be of land, buildings and dwellings but also of machinery, livestock, produce, stocks and goods that have not had to be valued before. This will require valuers to cover anything from clamp silage to company shareholdings, diversification assets to tenancies, as all will now fall increasingly under the microscope of the District Valuer. Whilst there currently seems little likelihood of the Government being persuaded to change their approach, it is prudent for farmers and landowners to assess their potential exposure and put strategies in place to mitigate the effects.

Our role is to help clients maximise the assets that they have, but also to provide expert advice and information that will inform business decisions. Good quality valuations have never been more important and here at BTF Partnership, we have a team of rural valuation professionals who would be more than happy to assist you in planning for the future.