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of the hypothetical willing vendor/hypothetical willing and prudent purchaser, and the relevance to the valuation of unpublished or commercially sensitive information about the company.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 can 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
HOW WE HELP
Need to settle a dispute over the value of a shareholding?
How much is your company worth?
Selling a minority shareholding. What is it worth?
Incorporating your sole trader business? What is the goodwill worth and what value will HMRC accept for tax purposes?
Making awards under a Management Incentive Plan? What is the value of the MIP shares for tax purposes?
Negotiations with HMRC at an impasse? Need a new perspective?
GET IN TOUCH
Possibly one of the most neglected and common areas of Pay As You Earn (“PAYE”) failure is where shares are sold by employees or ex-employees – disposals of employment-related shares.
Where not all conditions of the MoU are satisfied – is it possible to put some reliance on the principles of the MoU? If the ‘spirit’ of the MoU is satisfied, can management rely on it?
Following the introduction of the employment-related securities legislation in the Finance Act 2003, there was significant uncertainty in relation to the tax implications for management acquiring shares in venture capital (“VC”) and private equity (“PE”) backed companies.