What is the difference between a free business appraisal and a formal valuation?

A free appraisal is usually a broker's indicative figure, offered in the hope of winning a sale mandate, and is not written to be relied on by HMRC, a lender or a court. A formal valuation report names its purpose and reader, defines the basis of value, lists the information relied on and the assumptions made, is signed and dated, and is backed by professional indemnity cover.

Is business valuation a regulated activity in the UK?

No, it is not a reserved or licensed activity, so anyone may offer it. That makes credentials, relevant experience and professional indemnity cover the things to check. ICAEW runs a Valuation Community for chartered accountants working in the field, and RICS operates valuation standards and a Valuer Registration scheme for the property element.

How long does a business valuation stay usable?

Less time than most owners expect. HMRC treats an agreed EMI valuation as valid for only 90 days from the date of agreement, and treats events such as a change in share capital, a transaction in the shares or publication of new accounts as reasons a valuation should no longer be relied on. Any valuation should carry a date and state what it assumed.

Guide

Formal valuation report or a broker's free appraisal: which you need

Updated 2026-08-15

Both give you a number. Only one of them is written to be relied on by somebody other than you, and that difference is most of the fee.

Three products, not one

A broker's or adviser's free appraisal: Usually a marketing service offered by business transfer agents and some corporate finance firms. It gives an indicative asking price or range, often quickly, and it is offered because the firm would like the sale mandate. It is genuinely useful for orientation. It is not written for HMRC, a lender or a court, and it typically carries no professional liability to you.
A formal valuation report: A written report, prepared for an identified purpose and an identified reader, setting out the basis of value, the information relied on, the methodology, the assumptions and the limitations. It is signed, dated and capable of being relied on, and the firm carries professional indemnity cover for it. This is what tax matters, share schemes and most transactions actually require.
An expert report for proceedings: A formal valuation written to comply with Part 35 of the Civil Procedure Rules, where the expert's duty is to the court and the report must end with a statement that the expert understands and has complied with that duty. See valuations for divorce and shareholder disputes.

How to tell which one you are being offered

Is a purpose stated on the face of it? A formal report names its purpose and its intended reader, and says it should not be relied on for anything else.
Is the basis of value defined? For tax that will be market value on HMRC's hypothetical willing buyer and seller basis (CG59540). For a sale it may be something else entirely.
Is the information relied on listed? Including which accounts, which period, and what was not seen.
Are assumptions and limitations set out? A number with no stated assumptions cannot be checked, and therefore cannot be defended.
Is it signed and dated by a named individual? Valuations go stale. HMRC's own EMI agreements expire after 90 days for exactly that reason.

When the free appraisal is the right answer

If you are deciding whether to think seriously about selling in the next two years, an indicative figure from someone active in your sector is a sensible first step and costs nothing. Treat it as market intelligence rather than as a valuation, get more than one, and ask each firm what evidence sits behind the range.

When it is not

Anything HMRC will see: share schemes, gifts, reorganisations, negligible value claims, probate.
Anything a court will see, including divorce and shareholder disputes.
Anything a lender or investor will rely on.
Any transaction between connected parties, where the price paid is not evidence of market value. HMRC's manual specifically flags transactions not at arm's length as a case where a valuation is likely to be required (CG59561).

Credentials, since the work is unregulated

Business valuation is not a reserved activity in the UK, so no licence is required to offer it. That places the burden on you. ICAEW, the chartered accountancy body, runs a Valuation Community for members working in valuation (icaew.com). Where property forms part of the value, RICS maintains the valuation standards known as the Red Book and operates a Valuer Registration scheme (rics.org). Ask any firm what standards its report is prepared under, what professional body regulates it, and what professional indemnity cover it holds.