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HMRC internal manual

Capital Gains Manual

Assets: principles of valuation: special purchaser

Sometimes the value of an asset may be complicated by the presence in the market of a special purchaser. Such a person may, for his or her own reasons, be prepared to pay a sum in excess of the price that other hypothetical purchasers in the market would be prepared to pay for the particular asset.

For example, a person owns a Sevres cup and saucer. A collector of china has every other piece of that dinner service except that cup and saucer. The collector may be prepared to pay much more than the usual value of that cup and saucer to acquire them because, in doing so, the collector would complete the dinner service and so would make the whole much more valuable.

The issue of the effect of special purchasers bids on market value has been considered in numerous tax cases, such as Inland Revenue v Clay and Another (1914) 3KB 466, Wight and Moss v CIR (1983) 264 EG 937 and Walton (Executor of J H Walton Deceased) v IRC (1995) STC 68. It has been held that you may need to take account of the existence of a special purchaser in valuing the asset but that the price which the special purchaser would be prepared to pay may not be the full value of the asset to them. The bid of a special purchaser may be reflected in a valuation provided:-

  • The special purchaser can reasonably be shown to have been both able and willing to purchase at the date of valuation.
  • The existence of the special purchaser can reasonably be supposed to have been known to the ‘market’ at large.