What a valuation report must contain to survive a tax officer

Reports get rejected for boring reasons far more often than for wrong numbers. Missing date, missing registration number, no statement of the basis of value, no comparables, no photographs, a signature that does not match the register. The figure can be entirely defensible and the report still fails because of what is not on the page.

Here is the checklist we build to, and which you can use to audit any report you have already been given.

The things that get reports thrown out

1. No stated basis of value

Fair market value, market value, realisable value, distress value and reinstatement cost are different measures. A report that gives a figure without saying which one it is has not answered the question. The basis must be stated on the face of the report, and it must be the basis your purpose requires.

2. No valuation date, or the wrong one

Every valuation is an opinion as at one specific date. A report dated today, when what you needed was the value on 1 April 2001 or on the date of death, is the wrong report. This is the most expensive mistake on the list because it usually means starting again.

3. Missing or unverifiable registration

The valuer's registration number must be printed on the report, in the name of the individual signing it, for the correct register and the correct asset class. An officer will check. A firm name alone is not a registration.

4. A figure with no working

An assertion is not evidence. The report must show which comparable transactions were used, what each was adjusted for and by how much, and how the conclusion follows. If a reader cannot reconstruct your reasoning, they cannot defend it either.

5. No photographs, or undated ones

Dated, located site photographs are the proof that an inspection happened. Stock images of a similar building are worse than no images.

6. Silence about what was not done

If access was refused, if the title was taken on trust, if measurements came from documents rather than survey, the report should say so. Omitting limitations looks like concealment when somebody finds out later.

What a complete report contains

• Who it is addressed to and the purpose it was prepared for.
• The valuation date, stated separately from the report date.
• The basis of value, defined.
• A description of the property: address, survey or plot number, area, age, construction, tenure, condition.
• The documents relied on, listed.
• The method used, and why that method suits this property and this purpose.
• Comparable evidence, with sources and dates, and the adjustments applied.
• The valuation, in figures and in words.
• Assumptions and limiting conditions.
• Dated site photographs.
• The valuer's name, signature, registration number and date.
• A declaration of independence and no interest in the property.

Circle rate is not market value

A point worth making because it causes real arguments. The circle rate or ready reckoner rate is a floor set by the state for stamp duty purposes. It is not an opinion of market value, and in many localities it sits well below or occasionally above what property actually changes hands for.

A good report does not pretend the two are the same. It states the notified rate, states the market evidence, and explains the gap where there is one. That explanation is often exactly what an officer is looking for.

What happens if the officer disagrees

In income tax matters the assessing officer may refer a valuation to a Departmental Valuation Officer. This is normal and is not an accusation. The DVO does their own assessment and the two may differ.

What protects you is method. A report that names its comparables, dates them and shows its adjustments gives you something to argue with. A report with a bare figure leaves you with nothing to say beyond disagreeing.

Be realistic about this. Nobody can promise that a third party will accept a valuation. Any firm that guarantees acceptance is selling you something they cannot deliver. What is deliverable is a report built so that if it is questioned, the answer is already inside it.

How to audit the report you already have

Take it out and check, in this order: is there a valuation date, is there a basis of value, is there a registration number you can verify, are there comparables with dates, are there dated photographs, is there a signature. Six checks, two minutes.

If more than one is missing, you do not have a document that will survive scrutiny, whatever you paid for it. Send it to us and we will tell you honestly whether it needs redoing or whether it can be supplemented.