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HMRC internal manual

Capital Gains Manual

Partnerships: partnership assets and partners' interests in partnership: Valuation of a partner's fractional interest in a partnership asset: SP D12

Section 1 of SP D12 explains that the market value of a partner’s fractional interest in a partnership asset will be a fraction of the value of the entirety of the partnership’s interest in the asset without any discount for the size of the partner’s interest.

A valuation of a partner’s fractional interest in an asset can be obtained from:

  • the Valuation Office Agency - for land or buildings in the UK

or

  • Shares and Assets Valuation - for unquoted shares or securities, partnership goodwill, see CG68300+, or other intangible assets.

When obtaining a valuation of a partner’s fractional interest in an asset you must make it clear that the special partnership valuation basis is required and that the normal rules for discounting do not apply.

Example

A partnership between Y and Z owns 70% of the issued share capital of X Ltd.

The partners’ interests in partnership assets are:

Y 80%
   
Z 20%

 

The market value of the 70% shareholding as at 31 December accounting for the premium value attributable to the partnership’s controlling interest in X Ltd was £10,000.

 

The market values of the partners’ interests in the 70% shareholding in X Ltd as at 31 December were:

Y £10,000 x 80% = £8,000
   
Z £10,000 x 20% = £2,000

 

Note that the market value is apportioned by reference to the partners’ fractional interests. No premium value is attributed to Y’s larger partnership interest nor is any reduction in value attributed to Z’s minority partnership interest.