HMRC Shares and Assets Valuations (SAV)

Updated 1 February 2017


The list below doesn’t cover everything, but you should contact Shares and Assets Valuations (SAV), a specialist area of HM Revenue and Customs (HMRC), if you need a valuation for tax purposes for:

  • unquoted shares
  • intangible assets – such as intellectual property, trademarks, patents, goodwill etc
  • foreign shares
  • foreign residential property
  • bloodstock
  • chattels – such as antiques, art and jewellery
  • boats
  • aircraft

When the open market value of any of these assets is relevant to your tax affairs, your tax office may ask SAV to consider and, if necessary, negotiate the value with you.

You may have already passed an asset to another person but still need to enter it on your tax return. Where it’s difficult to establish market value, SAV can help. This is called a Post Transaction Valuation Check (PTVC).

Here you can find out:

  • how share and assets valuations are made
  • how to submit or prepare a valuation of assets
  • contact details for SAV

What SAV doesn’t do

SAV doesn’t value UK land or buildings for tax purposes. The Valuation Office Agency does this.

How SAV calculates its valuations

As there is no active market for most of the assets considered by SAV, decisions from the courts over the years provide guidance.

It’s important to carry out valuations for tax purposes on the basis of its ‘market value’ as defined in the relevant statute.

The definition of market value for:

These definitions are all very similar and broadly define market value as:

‘The price which the property might reasonably be expected to fetch if sold in the open market at that time, but that price shall not be assumed to be reduced on the grounds that the whole property is to be placed on the market at one and the same time.’

When considering the ‘market value’ of these types of assets, case law has assumed that:

  • the sale is hypothetical
  • the seller is a hypothetical, prudent and willing party to the transaction
  • the buyer is a hypothetical, prudent and willing party to the transaction (unless considered a ‘special purchaser’)
  • for the purposes of the hypothetical sale, the seller would divide the property into natural lots that would achieve the best overall price (this is described as ‘prudent lotting’)
  • any arrangements that needed to happen for the sale to take place have happened before the valuation date
  • the property is offered for sale on the open market by whichever method of sale will achieve the best price
  • there has been adequate publicity/advertising before the sale so it would reach the attention of all likely buyers
  • the valuation should reflect the bid of any ‘special purchaser in the market (as long as they’re willing and able to buy)

Definition of valuation date

Where the market value is being assessed because you’ve gained or sold assets, the valuation date is the date a binding contract was entered into.

For Capital Gains Tax cases the valuation date may be the 31 March 1982, when required by Section 35(2) of the Taxation of Chargeable Gains Act 1992.

Submit/prepare a valuation of assets

Below you’ll find details of points you should address, and evidence SAV need when valuing some of the common assets it deals with.

Unquoted shares

These are shares that don’t have a quotation on a recognised Stock Exchange anywhere in the world.

Information SAV needs includes:

  • company performance and financial status (they’ll want accounts for the 3 years before the valuation, if available, and any other information normally available to your shareholders)
  • size of the shareholding and shareholder rights (this can impact whether it’s necessary to agree the value of all the company’s assets or gather more information about company performance and prospects than is in the published accounts. For example, if the holding is one that would give control of a company)
  • the company’s dividend policy
  • appropriate yields and price earnings ratios of comparable companies or sectors
  • the commercial and economic background at the valuation date
  • your suggested value and how you’ve calculated it, this includes:

    • the valuation approach adopted, eg Earnings, Assets, Dividend Yield or industry specific valuation method
    • any assumptions or adjustments made
    • all the supporting evidence used

Include any other factors you think are relevant.

How to provide an accurate valuation

When you provide a valuation, you should always take into account how much a potential buyer can control, influence and get enjoyment from the asset.

Usually, if the buyer doesn’t control 100% of the asset, the value of the percentage share the buyer would own would be less than the pro rata proportion of the asset’s total value, to take into account the lower degree of control.

For unquoted shares, there are various degrees of control, usually based on the voting power of a particular block of shares, ranging from power to liquidate a company to a small or non-existent influence over the company’s affairs of a minority shareholding.

The pro rata value of shares that are part of a minority holding will be of less value than the pro rata of shares that are part of a majority holding.

The level of detail to use when you make a valuation is linked to the size and influence of the shareholding. The greater the influence, the more detailed and sensitive information about the company can be used along with the company’s accounts.

Enterprise Management Incentives (EMI)

You need to prepare your own valuation of your assets before SAV look at the value.

Valuing unquoted shares can be complex, but for small companies that may need to do a valuation, we’ve provided some illustrative examples below. These examples aren’t definitive or exhaustive and apply to companies with the most straightforward circumstances.

For further information on share valuations for EMI schemes see Share valuations: EMI and SIP share schemes

Start up company A – a technology based company with no trading history

The issued share capital is made up of 2 million shares.

1p A ordinary shares = 200,000 1p ordinary shares = 1,800,000

Both types of share have equal rights apart from:

  • the A shares having the right under the company’s articles of association to appoint 2 directors to the board
  • the A shares come before the ordinary shares on a return of capital
  • the ordinary shares are subject to risk of forfeiture and pre-emption provision

All the A shares are owned by an external investor who paid £2 million for them, or £10 per share.

The company now wants to grant EMI over a pool of 10% of as yet unissued shares to its employees.

There is no sale or flotation planned in the near future but the company plans for this to happen in the next 3 to 5 years.

It needs to provide valuations for Actual Market Value (AMV) and Unrestricted Market Value (UMV) of the ordinary shares at the date the EMI options are granted.

The company has no trading record. The assets consist of the balance of the cash from investment and some intangible assets.

A reasonable and tangible starting point to value the ordinary shares may be to look at the price paid for shares by the investor.

The company could reasonably discount that price by around 30% as these shares carry fewer rights, depending on the exact fact pattern. This would indicate an AMV of £7 per ordinary share.

When calculating UMV you should ignore the risk of forfeiture and pre-emption provision and so a 10% premium might be reasonable. This would indicate the UMV is £7.70.

Start up company B – a company with no external investment

In this scenario, all the initial capital is provided by the founder shareholders. 2 people invest £50,000 of their own money and receive 50,000 £1 shares in return. The issued share capital is then 100,000 £1 ordinary shares.

To build the business, the founders want to recruit but as they can’t afford commercial salaries for the new employees, they want to give them EMI over a pool of £10,000 shares in total.

Like start up company A, the company has no trading history and very few assets. So in this case, it could be reasonable that the employee shares are valued the same as the founders’ shares at £1 per share. It may also be reasonable to discount this if the founders have some preferential rights over and above the employees, according to the company’s articles of association.

Established trading company

This company:

  • has been trading for around 10 years
  • wants to incentivise employees by granting them a pool of up to 5% of the company’s enlarged share capital
  • is not in the process of a sale or flotation

To establish the AMV and UMV, the management accounts for 2012 have been used as the last published accounts (to November 2011) are considered stale by the company at the valuation and it’s reasonable to take into account more up to date information.

  Full audited accounts to November 2010 Full audited accounts to November 2011 Management accounts to November 2012
Turnover £6.5m £7m £7.5m
Post tax profit £525k £600k £600k
Dividends paid £1 per share £1 per share £1 per share
Dividend cover 2.62 3 3

If all possible sources of conversion exercised their options, the fully diluted share capital would be 200,000 £1 ordinary shares.

To get an idea of the AMV, the company needs to know or work out the:

  • earnings per share
  • dividends per share
  • price-earnings ratio - a valuation ratio of the company’s current share price compared to its per-share earnings
  • dividend yield percentage

From its accounts record, maintainable post tax profit (earnings) are £600k per year. This would mean earnings per share of £3.

Dividends are maintainable at £1 per share and are well covered.

To get an idea of the price-earnings ratio, the company looks at a quoted company on the full London Stock Exchange in the same market. It shows a price-earnings ratio of 12.03.

To reflect the differences between a minority holding in this company and the quoted company, the company discounts this price-earnings ratio by around 60% to 65%. This gives a final price-earnings ratio of 4.5.

To work out the AMV the company then multiplied the price-earnings ratio of 4.5 by the earnings per share of £3: 4.5 x £3 = £13.50.

This value can be cross checked by looking at the dividends payable. To work out the dividend yield the company looked again at the same quoted company which had a dividend yield of 3.40%. The company then increased this by a multiple of around 2, again to reflect the differences between the companies. The revised yield percentage is 7.4%.

The same AMV is achieved by dividing the maintainable dividend of £1 per share (equal to 100%) by the dividend yield of 7.4%:100 ÷ 7.4% = 13.5.

To work out the UMV, the company adds on around 20% to the AMV to give a value of £16.20 per share. This reflects that the Articles of Association for the company give the Board full veto on any share transfers and this and other restrictions should be ignored when calculating UMV.

Using other multiples instead of a price-earnings ratio

A multiple (of profits) can be used in place of a price-earnings ratio to calculate share value. You can work out the multiple by looking at the sales of companies - both private and quoted - in similar markets to the company under consideration.

To make sure any implied multiples are, so far as possible, reliable and comparable, you must carry out careful research of the terms of these companies’ sales beforehand.

If the company has a high level of debt on its balance sheet, which reduces any post tax profits substantially, the value of its shares can be arrived at by reference to an Enterprise Valuation (EV) looking at its maintainable Earnings Before Interest Depreciation and Amortisation (EBITDA).

It is then possible to apply an EBITDA multiple from a comparable quoted company. Deducting the company’s debt from the resulting EV will then leave the Equity Value, from which the minority share value can then be assessed, applying appropriate discounts.

Whilst EBITDA multiples for quoted companies are not available in publications such as the Financial Times, these can be calculated by the valuer, usually by adding a particular quoted company’s market capitalisation to its long term debt, to arrive at its EV.

The EBITDA for the quoted company can then be calculated by reference to its accounts and dividing the EV by the EBITDA, to give the multiple. It can then be appropriate to discount the quoted company’s EBITDA multiple to reflect the differences between the quoted company and the unquoted company which is being valued.

EV/EBITDA multiples can be found in the BDO Private Company Price Index (PCPI) which tracks the relationship between the EV to EBITDA multiple (EV/EBITDA) paid by trade buyers when purchasing UK private companies. The PCPI was updated in 2013 to incorporate EV to EBITDA multiples as the method of valuation, replacing the previously used Price to Earnings ratio.

Multiples can also be found in the private company Price Earnings Ratio Database (PERDa) compiled and analysed by members of the Leading Edge Alliance, a global alliance of major, independently owned, accounting and consulting firms.

The PERDa provides information on the pricing of private company sales and acquisitions. It shows the quarterly movements in the average Price Earnings Ratio (PER). This ratio measures the relationship between the consideration (price paid) for private companies and their underlying profits on an adjusted basis and includes the average PER based on Earnings Before Interest and Tax (EBIT) and Profit After Tax.

Note: Both the PCPI and PERDa are average measures and act as guides, and not as absolute measures of value, as there are many significant factors that can have an impact on value.

Depending on the starting point it may be appropriate to adjust the multiple to reflect factors such as comparable sales, trading activity, industry standards, age of the business, reliance on key personnel etc.

Company with imminent Alternative Investment Market (AIM) flotation

A previously private computer software company is planning to float on AIM in the next 2 weeks but wants to grant EMI options to employees first.

The price that investors are invited to buy shares at, which will also be the opening price on AIM, will be £2.50 per ordinary share.

The employees will be granted EMI options over the same ordinary class of share as will be floated on AIM, but there will be individual performance targets in their option agreements that will determine when they can exercise their options.

A small discount may be appropriate, depending on the facts, to reflect any risk that the float may not go ahead in the scheduled time frame.

It may therefore be reasonable to use the price of £2.50 per share or - subject to the above factor - very close to this, as both AMV and UMV for the purpose of granting the EMI options.

There’s no need to adjust/discount (for a valuation for option purposes) to reflect the performance conditions restricting the employees’ freedom to exercise their options, as these conditions are personal to the employee only.

Company in talks over a sale

A component production company is in talks with a competitor business for a sale of the company. The sale price, subject to due diligence, is likely to be made up of cash and a small earn-out element.

In anticipation of a sale, the company wants to grant EMI options over 10% of the fully diluted share capital to its employees.

The likely sale proceeds are not known but the range equates to £20 to £22 per share on a pro rata basis.

In the light of the impending sale, it’s reasonable to value the shares over which options will be granted to the employees by reference to the possible sale proceeds per share.

Depending on the level of risk, uncertainty over the final amounts payable and also the timing, it might be reasonable to apply a discount in the range of 15% to 30% indicating a share value of around £14 to £18 per share for the EMI options. It will depend on the specific circumstances of the company as to whether a differential is required between the AMV and UMV.

Negligible value claims

SAV is sometimes asked by the tax office to investigate negligible value claims where assets have become worth next to nothing while someone has owned them.

When you meet all of the relevant conditions you can make a negligible value claim to offset any loss arising from Income Tax or Capital Gains Tax. You can make a claim by contacting your tax office, either by letter or by entering a negligible value on your tax return.

If the company is in liquidation or receivership you should provide the following:

  • a statement of affairs for the company and any subsidiaries
  • a letter from the liquidator or receiver showing whether any return will be made to the shareholders
  • details of how this decision was reached, for example, a balance sheet showing significantly more debts than assets
  • any evidence that no recovery or rescue of the company is likely, for example, a statement that the company has ceased trading

If the company is not in liquidation or receivership

Comprehensive information is needed to show that the shares or securities have become of negligible value. The responsibility for proving the claim lies with you.

How to define ‘negligible’

There is no rule of thumb to define ‘negligible’. It’s objective. A rule of thumb percentage of either the nominal value of the securities or of the price for which you originally acquired them may not work. The securities could pass such a percentage test but still have significant value. SAV considers each case on its own merits.

Assets can’t have been ‘negligible’ when they were acquired

To qualify, the asset must have become of negligible value. You should provide evidence to show that the assets had value when they were acquired.

Negligible value claims in respect of companies that were formerly quoted

SAV publishes a list of shares and securities in companies that were formerly quoted on the London Stock Exchange that have been previously accepted as being of negligible value. However, even if a company appears on the Negligible Value List then you still have to submit your claim to your tax office as above. The list is available at the following link Negligible Value List

There is no similar list published for either unquoted companies, companies formerly quoted on the Alternative Investment Market and PLUS Market or any non-UK companies.

Goodwill of sole traders and partnerships

Previous court rulings provide authority on how to value goodwill.

For Capital Gains Tax purposes goodwill should be construed with legal rather than accountancy principles.

A distinction must be made between ‘goodwill’ for Capital Gains Tax purposes and ‘goodwill’ within Sch29 FA 2002 where accountancy principles apply and ‘goodwill’ is simply the difference between the overall worth of a business when it changes hands and the value of its identifiable (including intangible) assets.

The goodwill of a business is the attractive force which brings in custom, it is the thing that distinguishes an old established business from a new entity. In a business reliant on the skill, personality and other personal attributes of the proprietor, it is likely that the goodwill will be personal to the proprietor. Personal goodwill can be found in businesses where these attributes are essential to the existence of the business such as, but not limited to, chefs, hairstylists, artists etc, though it may not be the only type of goodwill the business has. It may also be found in relatively new businesses but, as usual, each case has to be judged on its own merits.

If the business could not continue without the proprietor the goodwill is likely to be personal. If other individuals were also employed there is likely to be business goodwill but the value will be lowered by the personal element because any profits attributable to the reputation, personal skill or ability of the proprietor must be excluded.

As far as synergy is concerned, we are required to consider an open market value for the goodwill transferred. Maybe a purchaser would be prepared to offer a premium on the basis of obtainable synergies; however this assumption introduces the concept of a special purchaser to the valuation. There should be no expectation of a synergy based value on an open market value basis unless synergy in a particular market is common place.

The relevance of a special purchaser for valuation purposes has already been considered in decided cases. This was shown in the early case of IRC v Clay [1914] 1KB 339 and also in Lynall. However, it cannot be assumed from Clay that the mere fact of the existence of a special purchaser is enough to have a substantial effect on market value. A critical part of the reasoning as to the special purchaser’s relevance was the fact that the special purchaser’s existence was known to the market. This point was identified by Lord Pearson in Lynall (at 706C-D). Writing in the context of the fact that confidential information in the possession of the board was (under the then legislation) irrelevant to open market value, he distinguished Clay:

“The situation differs from that in [Clay], where the special fact enhancing the price of the property was assumed to be a matter of local knowledge”.

When valuing the goodwill of a business, you should provide details of:

  • the full sale/purchase documentation relating to the transfer of both tangible and intangible assets
  • succession arrangements
  • the valuation approach used – eg capitalisation of profits, super profits or a trade specific method – with your workings out
  • the activities of the business and role of the owners within it
  • the company’s performance and financial status as shown in its accounts for the 3 years before valuation
  • any other relevant financial information
  • appropriate yield and multiples of comparable companies and sectors
  • the commercial and economic background at valuation date
  • how the personal goodwill of the owner has been reflected in the valuation
  • all the supporting evidence applicable
  • any other relevant factors

Goodwill within the leisure sector (eg hotels, nursing homes, public houses etc) will be considered by SAV along with Royal Institute of Chartered Surveyors qualified valuers within the Valuation Office Agency.

Quoted shares

SAV may be asked to consider the value of quoted shares where:

  • they’re on a foreign stock exchange
  • the quote is suspended or cancelled on the Stock Exchange
  • the quoted price is not representative of the open market value of the shares, eg the quote is stale or the holding to be valued is exceptionally large

You should provide your best estimate of the value of the stock together with supporting evidence and the exchange rate used, if applicable.

Intangible assets

Identification of intangible assets can be very difficult and involve a range of complicated issues, especially in respect of intellectual property. HMRC defines intangible assets as non-financial fixed assets that do not have a physical substance but are identifiable and controlled through custody or legal rights. They include:

  • goodwill (including know how)
  • registered trademarks or brand names
  • intellectual property rights such as copyright, patents and design rights
  • publishing rights
  • franchises, dealerships and licenses

If the circumstances of your case are complex, you may want to seek specialist guidance.

Intangible assets are often valued either on a multiple of profit/income stream or using a discounted cash flow. When submitting a valuation of an intangible asset you should provide:

  • a full description of the asset and the taxpayers rights over the asset
  • details of how you arrived at the profit/income stream and/or any projections and any adjustment you’ve made
  • an explanation of how you arrived at your profit/incomes multiple and/or discount rate


Chattels include:

  • works of art
  • antiques
  • memorabilia
  • classic cars
  • number plates
  • wine and spirits
  • bullion

If your valuation is for Inheritance Tax purposes, you’ll need to fill in Form D10 which is a supplementary schedule attached to the IHT200. This will guide you through the information you need to provide.

For all valuations you need to provide as appropriate:

  • a full description of the items
  • details of your proposed open market value for individual or specific groups of items
  • an explanation of how you arrived at that value (where a professional valuation is not available) and why, if appropriate, a low or ‘nil’ value has been returned
  • a copy of any professional valuation you’ve obtained, this should include an explanation of how the value was arrived at, it’s not enough to say it’s been prepared by an expert
  • details of any sales proposed
  • details of the gross sales proceeds of any items that have been sold (if the sale of any item has been for less than market value you’ll need to provide the full open market value)

Bloodstock and livestock

Usually, it’s race horses and livestock herds that are being valued under this category.

For horses, you should include:

  • the name of the horse
  • the horse’s lineage, eg dam and sire
  • details of how you arrived at your proposed value

For livestock, include:

  • the breed, sex and age of the cattle
  • calving patterns for dairy herds
  • details of how you arrived at your proposal

Lloyd’s underwriting interests

The value of a Name’s Lloyd’s underwriting interest normally qualifies for Business Property Relief (BPR) at 100% under IHTA 84/S105(1)(a) if the Funds at Lloyds (FAL) are similar in size to the amount of underwriting business that is being written by the Name.

As a rule of thumb, BPR is not restricted as long as the value of the FAL assets are not substantially greater than the minimum FAL requirement.

When preparing/submitting a valuation for a Name’s underwriting interest, you need to provide:

  • the total FAL, excluding any dividends or interest arising from the assets
  • allocated premium limit for the last 2 years
  • the profits/losses arising on the open years
  • any accounts in run-off
  • any Estate Protection Plan or Exeat Policy held
  • any proceeds from the sale of syndicate capacity at auction

Foreign land/property

When preparing/submitting a valuation of foreign land/property, you will need to provide (as appropriate):

  • the full address of the property
  • a full description of the property – include the number and type of rooms, the approximate floor area, any additional facilities, eg swimming pool, tennis court etc, a photograph of the property if this is available, the approximate area of any land owned and the use to which it is put, and briefly, the surrounding area and its amenities.
  • if the property is other than freehold (or its local equivalent), full details of the lease, or similar
  • if the property was let at the date of valuation, the principal terms of the tenancy, such as rent payable, provisions for rent revision, duration of tenancy
  • details of who estimated the value and if you got a professional to value your property, a copy of their valuation
  • an explanation as to whether the value offered represents the statutory open market value (If not, state on what basis it has been calculated, eg in Spain the value may be the ‘valor cadastral’ which is generally lower than open market value)
  • details of how and when was the property acquired and, if appropriate, what the purchase price was
  • any agreed value with the Foreign Tax Authorities
  • details of whether you’re thinking about an open market sale of the property
  • the exchange rate have you used if the value is in local market currency

Post Transaction Valuation Checks (PTVCs)

For SAV to carry out a PTVC, you must fill in a CG34 form and send it to the address on the form. SAV can only carry out a PTVC:

  • after disposals relevant to Capital Gains Tax
  • before the date you have to complete your Self Assessment tax return

SAV may ask you for further information and, if it doesn’t agree with your valuation, will suggest an alternative valuation to negotiate with you.

Sometimes it won’t be possible to agree values before your tax return due date. In these cases you must still submit your tax return and enter the amount of gain or loss that you expect SAV to agree from the valuation on it.

Employment Income (ITEPA) PTVCs and PAYE health checks

These informal services will be withdrawn with effect from 31 March 2016.

Any requests for ITEPA PTVC/PAYE health check valuations received after this date will not be processed.

Appeals and tribunals

SAV settle the vast majority of valuations referred by negotiation but if it is not possible to reach a negotiated agreement it will be necessary to arrange an appeal hearing before the Tax Tribunals to resolve the matter.

Further details on the Tax Tribunals system

Contact details

Find out how to contact SAV

More information

For more information about SAV, read the SAV Manual.

SAV Fiscal Forum

SAV meets annually with external practitioners at the Share and Assets Valuation Fiscal Forum to swap views and opinions on technical and practical matters. The Forum is an opportunity to clarify current practice and to update practitioners on procedural matters. There is a separate forum for matters relating to chattels.

SAV Fiscal Forum minutes

Company Share Option Plans and Save As You Earn Share Schemes

For further information on share valuations for these types of schemes, see Share valuations: CSOP and SAYE share schemes