Capital Gains Tax and Inheritance Tax

The valuation basis for Capital Gains Tax purposes is defined in s.272 of the Taxation of Chargeable Gains Act 1992 as the price the asset in question could reasonably be expected to fetch if offered for sale in the open market. The definition of market value for Inheritance Tax purposes is found in s.160 of the Inheritance Tax Act 1984 and is broadly the same.

This valuation basis clearly anticipates application of commercial valuation techniques – what price would the shares command in the market as it was at the valuation date? Our practical experience in commercial valuation is an ideal base from which to conduct tax-related valuations.

In order to advise clients effectively, the valuer must be aware of and understand the case law principles which govern tax-based valuations, including the concepts of the hypothetical willing vendor/hypothetical willing and prudent purchaser, and the relevance to the valuation of unpublished or commercially sensitive information about the company. Statute and case law does not define precisely what information should be taken into account and this uncertainty can become an area of significant disagreement with HMRC. We have considerable experience of dealing with these issues and can provide reliable advice to steer clients through the complexities.

How we help

We don’t take a ‘one size fits all’ approach in the cases. Our aim is always to give our clients the specialist help and advice they need appropriate to their situation. This can include the following:

  • assisting in tax planning steps by advising on HMRC’s likely valuation before decisions are taken
  • providing values to be included in a client’s tax return supported by an authoritative report
  • in CGT cases, requesting an HMRC ‘Post Transaction Valuation Check’ with the aim of obtaining HMRC agreement on valuation before a tax return is filed
  • valuation advice in support of negligible value claims under s.24(2) TCGA 1992
  • taking responsibility for negotiating agreed values with SAV

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