Shares and assets valuations for tax

Find out about the HMRC Shares and Assets Valuations (SAV) team, how to get a Post Transaction Valuation Check and how to appeal a valuation.


SAV are a specialist HMRC team that values assets for other parts of HMRC. The area of HMRC that deals with your tax affairs may contact us to check if the value of assets you have declared to them is accurate.

We also deal with:

You cannot ask SAV to give you a valuation for:

  • aircraft
  • bloodstock (for example, race horses and livestock herds)
  • boats
  • chattels (such as antiques, art and jewellery)
  • foreign residential property
  • foreign shares
  • intangible assets (such as intellectual property, trademarks, patents and goodwill)
  • negligible value claims - find out more about negligible value claims and agreements
  • quoted and unquoted shares

We do not give:

  • UK land or buildings valuations for tax purposes - contact the Valuation Office Agency
  • post-transaction valuation checks for the Income Tax (Earnings and Pensions) Act
  • informal health checks for PAYE purposes

Post Transaction Valuation Checks

We may be able to help if you’ve disposed of assets and need their valuations checked and you’re:

  • an individual working out your Capital Gain liability
  • a company working out your Corporation Tax liability

This is called a Post Transaction Valuation Check.

You must fill in a CG34 form for us to carry out a Post Transaction Valuation Check, then send it to the address on the form.

Individuals can only request a Post Transaction Valuation Check:

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

We may ask you for further information after we review your CG34 form.

If we do not agree with your valuation we will suggest a different valuation to negotiate with you.

Sometimes it will not be possible to agree values before your tax return has to be filed. You must still file your tax return and enter the amount of gain or loss that you expect us to agree a valuation on.

Enterprise Management Incentives (EMIs)

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 are not definitive or exhaustive and apply to companies with the most straightforward circumstances.

Read Get a share scheme valuation from HMRC for more information on share valuations.

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
  • A shares come before the ordinary shares on a return of capital
  • 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 cannot 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 Full audited accounts to November 2012
Turnover £6.5m £7m £7.5m
Post tax profit £525,000 £600,000 £600,000
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 to EBITDA multiples can be found in the BDO Private Company Price Index (PCPI) which tracks the relationship between the EV to EBITDA multiple 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 or 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.

How to disagree with a valuation

We settle almost all of valuations that are referred to us by negotiation. If you cannot reach an agreement the valuation can be heard by the tax tribunal after you have filed your tax return.

If you think we have made a mistake or treated you unfairly, you can ask for the matter to be reviewed by the Assistant Director in charge of the part of SAV where the valuation was carried out.

Find out how to complain about HMRC if you’re still not happy with the outcome and want to complain.

What to expect from SAV

If you appoint an accountant or professional valuation firm we will deal directly with them. Make sure your professional adviser has all the facts, as you’ll be responsible for the accuracy of the information given to SAV.

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.

You can expect us to explain any actions we take. This includes why we:

  • would like to meet with you
  • need to question any explanation you have given
  • propose a valuation different to yours

If you or your professional adviser:

  • wants to meet to discuss the valuation we will try to arrange a meeting - this may mean the process will take longer than usual
  • write to us with a question or issue we will try to respond within 10 working days - if we cannot we’ll let you know the reason for the delay and when you can expect a full response

How SAV shares your information

Your company and its directors and shareholders have the right to the same level of confidentiality as all taxpayers.

We will only give information to people you have authorised, except in the limited circumstances allowed by law (such as at a tax tribunal).

Get help and more information

Read the HMRC SAV Manual to find out the information we use to value:

You can get advice about asset valuations if you:

Published 7 May 2019