Guide
Valuations for tax: HMRC Shares and Assets Valuation, EMI and CGT
Updated
Where a valuation exists for a tax reason, HMRC is not a bystander. Knowing exactly what its Shares and Assets Valuation team does, and does not do, changes what you should be paying a valuer for.
HMRC will check a value. It will not produce one for you
Shares and Assets Valuation (SAV) is described by HMRC as "a specialist HMRC team that values assets for other parts of HMRC". Its published guidance lists what you cannot ask SAV to give you a valuation for, including quoted and unquoted shares, intangible assets, boats, aircraft and chattels, alongside the things it does deal with: Post Transaction Valuation Checks, and requests for share scheme valuations (gov.uk, shares and assets valuations for tax). The practical consequence is straightforward: you propose a value, and HMRC agrees it, negotiates it or rejects it.
HMRC also does not value UK land or buildings for tax purposes; that goes to the Valuation Office Agency. So a company holding property generally needs two valuation exercises.
Share schemes: EMI, SIP and the others
- EMI
- "Fill in a VAL231 form to get an EMI valuation." You are asked to propose the unrestricted market value and the actual market value for shares under options carrying restrictions that affect market value. Crucially: "Valuations for EMIs are valid for 90 days from the date of the agreement." Miss that window and the grant timetable slips.
- SIP
- "Fill in a VAL230 form to get a SIP valuation." SIP valuations can last up to 6 months but end early if a significant event occurs. HMRC lists significant events including a change in share or loan capital, an arm's length transaction in the company's shares, negotiations or preparations for a flotation or takeover, a dividend declaration, and publication of new financial information such as annual accounts.
- CSOP and SAYE
- To agree a market value you write to SAV with a proposed value, three years of accounts before the valuation date (or whatever exists if newly trading) and any other relevant information, such as plans to sell or float the business.
All of the above is from HMRC's guidance on getting a share scheme valuation (gov.uk).
Capital Gains Tax: is a valuation even required?
This is worth checking before commissioning anything. HMRC's Capital Gains Manual states that "a valuation is not required merely because you are dealing with a disposal of unquoted shares. There must be a statutory reason for displacing the amount paid or received for the shares by their market value" (CG59540). The manual lists cases where a valuation is likely to be required: shares held on 31 March 1982, acquisitions or disposals not at arm's length, shares involved in a share reorganisation, and negligible value claims (CG59561).
Where a value is needed, the standard is the ordinary market value rule: "The value is equal to the price you would expect in an open market sale between a hypothetical willing seller and a hypothetical willing buyer." That hypothetical buyer, and what information they are assumed to have, is where most of the technical argument sits.
Post Transaction Valuation Checks
Since 1 April 1997 taxpayers have been able to request a post transaction valuation check using form CG34. HMRC says it may be able to help where you have disposed of assets and need their valuations checked, whether you are an individual working out a Capital Gains liability or a company working out Corporation Tax. Individuals can only request one after the relevant disposal and before the Self Assessment filing date. If HMRC disagrees it will "suggest a different valuation to negotiate with you", and if agreement is not reached before your filing deadline you must still file and enter the gain or loss you expect to be agreed.
Timescales and disagreement
- Four weeks. HMRC states: "When we have all the information we need we will try to reach an agreed valuation within 4 weeks of getting your request. If we have to ask you for more information it can take longer."
- Ten working days is HMRC's stated target for responding to written questions or issues from you or your adviser.
- Negotiation first. HMRC says it settles almost all valuations referred to it by negotiation. If agreement cannot be reached, the valuation can be heard by the tax tribunal after you have filed your tax return.
- Your adviser is dealt with directly. HMRC notes that if you appoint an accountant or professional valuation firm it will deal directly with them, and that you remain responsible for the accuracy of the information given to SAV.
Probate and Inheritance Tax
Where a business interest sits in an estate, the valuation feeds a statutory return with hard deadlines. Gov.uk states that if the estate owes Inheritance Tax you must report its value within one year using form IHT400, that you cannot apply for probate until you have done so, and that you must pay Inheritance Tax by the end of the sixth month after the death to avoid paying interest (gov.uk, how to value an estate). It also notes that valuing an estate can take several months, and longer if it is large or complicated. Commission the valuation early.
This page describes published HMRC guidance. It is not tax advice, and it does not tell you whether a valuation is required in your circumstances. Take advice from a qualified adviser on your own facts before relying on any of it.