Clarifications – eBrief 207/24

Revenue have issued a recent ebrief to clarify certain matters on the valuation date. This is set out in brief 207/24. That ebrief sets out the Valuation Date manual which is useful to read and is attached in a link below. Revenue in the ebrief have clarified two points:-

First relates to the clawback of agricultural relief. To avail of agricultural relief, you must meet the asset test not on the date of death but on the valuation date. This is very valuable as it gives a successor an opportunity to re-organise their assets between death and the valuation date. Also, one has more opportunity to manage the valuation date than the date of death. You can “gamify” the valuation date, by delaying submission of probate or submission of papers for clearance. The rule prior to the Finance Act (No 2) 2023 was that if you disposed of assets there was a clawback of agricultural relief. The rule was that you had to hold onto assets for 6 years from the date of death. With the passing of Finance Act (No 2) 2023 the rule now is that you must hold onto your agricultural assets (or not dispose of them) for a period of six years from the valuation date. This has the effect of pushing out the clawback period by some distance, but, is understandable. One can’t have the benefit of buying time and suiting a successor by purposely delaying a valuation date to meet the asset test and also have the double benefit of using that time to eat into the clawback period.

The second change to the valuation date manual relates to the situation where you have joint property, which passes by survivorship – in that case the valuation date will be the date of death. The manual removes the phrase “in the context of real property”, as it gave the impression that these rules only apply to real property but in fact the rules on the valuation date apply equally to both personal and real property.

Reflections on the Valuation Date

If you read the Valuation Date manual, it makes it clear that the valuation date is the later of three events:-

• the date on which a personal representative is entitled to retain assets for the benefit of a successor

• the date on which an asset is retained

• the date of delivery of assets, payment etc to the successor

So, the valuation date is really the date by which assets may be “retained” either by the per rep or the beneficiary.

The manual goes onto to clarify, what is meant by “retain”. It states

‘”Retainer” is something analogous in character to actual delivery or payment. It is an essential feature of a retainer that the legatee should be entitled either to demand delivery or payment, or to have the beneficial enjoyment of the legacy.’

Then it goes onto state that the grant of probate is generally considered the date of the valuation date. However, I would not necessarily agree with that, and in this writers view, the date of the letter of clearance should be considered the valuation date and is consistent with the concept of “retainer” above. In many estate administrations assets are not necessarily distributed after the grant and personal representatives wish to hold off from distributing assets both real and personal until such a time as Revenue clearance has been obtained. In those cases a justifiable argument could be made that the valuation date is the date of the letter of clearance. This office has adopted that approach on many files without challenge from the Revenue.

At times where it is known that the income levels of the deceased was low but there was a generous cash residue, some personal representatives feel comfortable in distributing real property assets after the grant and prior to the letter of clearance in the knowledge that there is little likelihood in recourse having to be made to those real property assets to discharge an income tax liability. Certainly in those cases, a valuation date has arisen with respect to those real property assets. However in some cases personal representatives take a far more conservative view and distribute all assets of whatever character post letter of clearance.

There is no reference to the letter of clearance in the Valuation Date manual by Revenue. Obviously it is in their interest to have the valuation date as early as possible. However the word “retain” is a broad term and certainly there is a growing consensus that the date of the letter of clearance is a valid basis of the valuation date.

I hope this helps. If you have any probate, will drafting or tax queries, please reach out to me on colm@theprobatehub.ie or using our solicitor query service.

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Here is the link to the Valuation Date manual