The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Valuations may be required for tax purposes in many different scenarios, including:
on grant of share options to employees in a tax-advantaged share scheme
where the taxpayer elects to ‘rebase’ assets to their value as at 31 March 1982
where assets are transferred between connected parties
where shares are acquired at undervalue by reason of someone’s employment
This guidance note is concerned with share valuations for tax purposes. For guidance on performing share valuations more widely, including for commercial purposes, and the risks involved for the practitioner , see the Professional valuations guidance note. For guidance on specific commercial valuation methods which may also be relevant to tax valuations, see the Measures and methods of valuation guidance note.
There are two relevant definitions in the Taxes Acts for the purpose of private company share valuations.
‘Market value’ is defined in TCGA 1992, s 272 and in IHTA 1984, s 160. It is essentially the amount which could be fetched on the open market between an arm’s length vendor and purchaser. This is covered in further detail below.
The definitions of market value in IHTA and TCGA are very similar and case law which is relevant for one is generally relevant for both. Principles established in relation to the definition of valuations for estate duty and capital transfer tax are also relevant for capital gains tax and inheritance tax as the definition was the same as it is for inheritance tax.
Most share valuations for capital gains tax, inheritance tax, and tax-advantaged shares schemes require the ‘market value’ to be determined. However, if a share transaction gives rise to earnings under ITEPA 2003, s 62, the relevant value is ‘money’s worth’.
‘Money’s worth’ is defined in ITEPA 2003, s 62(3). Money’s worth is essentially the amount a recipient of an asset could fetch for an asset, taking into account any restrictions which may be in place.
Money’s worth and market value could on occasion be substantially different.
For fiscal valuations, market value
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
The substantial shareholding exemption (SSE) provides a complete exemption from the liability to corporation tax on the gains generated from qualifying disposals of shares and interests in shares by qualifying companies. Conversely, if losses are generated by the disposal and the SSE conditions are
Terminal loss relief for trade losses in the final 12 monthsTrading losses incurred by a company in the final 12 months leading up to the discontinuance of trade may be carried back for up to three years from the period beginning immediately before that 12-month period. So if the final accounting
Summary of capital allowances on carsThe current capital allowance rates applicable to cars are as follows:Pool typeDescription of carRateLegislationMain rate poolNew and unused cars with CO2 emissions over 50g/km but not more than 110g/km (to be reduced to 50g/km and below from April 2021)18%CAA
Time for paymentTwo statutory rules apply on death:•tax is ‘due’ six months after the end of the month of death and carries interest from the ‘due’ date until paidThere is a possibility of payment by instalments, but this applies to certain types of property only ― see the ‘Availability of
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.