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HMRC internal manual

Capital Gains Manual

Assets: principles of valuation: incorrect methods of valuation

You will sometimes see valuations which are based on

  • intrinsic value
  • replacement value, or
  • cost of labour and materials.

Each of these approaches may provide a useful check on the accuracy of a market value estimated in accordance with TCGA92/S272 (1). However it is the price which a willing buyer would pay to a willing seller at the valuation date which is to be taken as the market value. For example, the market value of a house may bear no relation to the cost of the bricks and other materials which make up that house.

Some taxpayers calculate the value of an asset at 31 March 1982 by deducting the relevant increase in the Retail Price Index from the sale price. They argue that any increase in value between 31 March 1982 and the date of sale is purely the result of inflation. This approach is not acceptable. The value of an asset at 31 March 1982, or at any other date, must be calculated by reference to the principles set out in CG16330.