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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
, see all updates

Assets: principles of valuation: hypothetical purchaser

The market value of an asset is the price which

  • a hypothetical purchaser would be prepared to pay to
  • a hypothetical vendor

at the valuation date. For this purpose you should assume that the value is the price which would be paid by a willing buyer to a willing seller. You should not accept arguments which are based on the idea that the taxpayer did not want to sell the asset at the valuation date and so would have required a sum substantially in excess of the true value of the asset to persuade him or her to make a sale.

Evidence may be presented of an offer to buy the asset which was made at or near to the valuation date. This actual offer may sometimes represent the value of the asset in the market at that time but such evidence should be used with caution. An offer may be merely the prelude to negotiation. The offer price, if it had been pursued, may have been adjusted upwards or downwards to reach a contract price. The offer made may bear no relation to the bargain which would have been made between a hypothetical willing buyer and a willing seller and so may not be good evidence of value.

In principle the class of hypothetical purchasers may be taken to include the vendor of the asset, if this would have an impact on the market value, see Stephen Marks v HMRC (TC/2010/01706) paragraph 26 onwards.