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S.160 IHTA 1984 defines market value for IHT as follows:-

. the value at any time of any property shall for the purposes of this Act be the price which the property might reasonably be expected to fetch if sold in the open market at that time; but that price shall not be assumed to be reduced on the ground that the whole property is to be placed on the market at one and the same time.

S.272(1) and (2) TCGA 1992 defines market value for CGT purposes as follows:-

. the price which [the] Assets might reasonably be expected to fetch on a sale in the open market. In estimating the market value of any assets no reduction shall be made in the estimate on account of the estimate being made on the assumption that the whole of the assets is to be placed on the market at one and the same time.

S118 FA 2003 states market value for the purposes of SDLT:

.shall be determined as for the purposes of the Taxation of Chargeable Gains Act 1992

The statutory definitions of market value are essentially similar. There is only one absolute qualification contained in the statutory provisions namely, that the price is not to be reduced on account of the market being flooded by reason of the assets to be valued being marketed at the same time. The short and simple direction contained in the statutory definition, that the value of the property is to be the price it would fetch if sold in the open market, has been illuminated by case law and certain basic principles have been established. These are discussed below and in Practice Note 1.

Differences exist between the basis of open market value used for normal Revenue purposes and the basis of valuation applied to Schedule E (except under s.154 ICTA 1988, where the normal Revenue basis applies). This is dealt with more fully in CGT Manual Section 1 Part 5.

Where it is necessary to provide an estimate of the market value of a property at a particular time for Revenue purposes, the principles set out in Practice Note 1 should be borne in mind when arriving at the value. The following paragraphs provide additional information which may be of assistance.

Prudent lotting

The principle of prudent lotting (see Practice Note 1: paras 3.1 - 3.4) applies where an estate consists of items of property which properly may be treated as separate units in order that the best price can be obtained. Lotting is essentially a matter of judgement. Artificial and unnatural lots should generally be avoided, however, reference should be made to the judgement of Hoffman LJ in the case of IRC v Gray (Executor of Lady Fox deceased (1994) (see Practice Note 1 Appendix F) with regard to the natural unit. There may well be circumstances where a sale of the whole estate, as a single lot, would achieve a better price than if it were sold as separate units.

It should be noted that the statutory definitions contain the qualification that the price must not be assumed to be reduced on the grounds that all the property is placed on the market at the same time.

It should be noted that the principle of prudent lotting can only be applied to whatever property falls to be valued. In IHT death cases it is necessary to value the whole of the deceaseds estate but in CGT cases the only assets that are to be valued are those included in the particular disposal in question.

Special purchaser

Land may have a special value to a particular purchaser by reason of its position or the type of building thereon. This special value may be reflected in the valuation provided that:

• The special purchaser can reasonably be shown to have been both able and willing to purchase at the date of valuation.
• Existence of a special purchaser can reasonably be supposed to have been known to the mark
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