Valuation: unquoted shares: what is to be valued and at what date?
SAV will provide you with a value per share. The size of the shareholding to be valued can be a critical factor in determining the value per share. If the value per share for a 75 per cent shareholding is £100 the value per share for a 10 per cent shareholding in the same company may only be £20 per share. This is one of the reasons why it is essential you send a CG30 in every case and do not rely on a valuation which has been provided for another taxpayer.
The dates on which you are most likely to require a valuation are
- 31 March 1982 - for indexation and rebasing purposes
- the date of acquisition or disposal - to substitute market value for any actual consideration given.
31 March 1982
You must ask for a valuation of the entire holding of shares actually held at 31 March 1982. By far the commonest mistake in completing a CG30 is to ask for a valuation of the shares sold and not all the shares held. The size of the shareholding to be valued can be a critical factor.
This may be very different from the shares actually disposed of - the share exchange rules in TCGA92/S135 (see CG52500+) can mean that the shares held at 31 March 1982 were in a different company to the shares actually disposed of. It is the shares the taxpayer held at 31 March 1982 which you must ask SAV to value.
Detailed instructions can be found at CG59580+. Put simply, the valuation will usually be the total number of
- the shares in the 1982 holding plus
- any shares held at 6 April 1965 and still owned plus
- any shares acquired after 31 March 1982 on certain no loss/no gain transactions from a person who held them on 31 March 1982.
If the taxpayer makes a claim under Extra-Statutory Concession D44, you will need to check the size of the shareholding to be valued (see CG59584). You only need concern yourself with this if the taxpayer makes a claim.
Finally, are you sure the shares disposed of require a 31 March 1982 valuation? The share identification rules may mean that the shares disposed of do not need to be matched with shares held at 31 March 1982 (see CG51555).
Date of disposal or acquisition
You will usually only require a valuation at this date if
- the disposal and acquisition were by connected persons (see CG14530+), or
- the transaction was otherwise than by way of a bargain at arm’s length (see CG14540+), or
- there is a negligible value claim under TCGA92/S24 (2) (see CG13120 onwards) and the case is not one in which you may accept the figures (see CG13145). The valuation date is the date on which the taxpayer makes the negligible value claim. If the taxpayer has taken advantage of TCGA92/S24 (2)(b) and wants to be treated as if the shares had been sold on a date before the claim was made, Shares and Assets Valuation will have to consider whether the shares were of negligible value on that earlier date as well as on the date the claim was made, see CG13130 and CG13135.
You will need a value of the total number of shares included in each separate disposal. In the case of a gift if there are two recipients there are two disposals.
If the disposal and acquisition is between connected persons, you will need to consider whether there have been any other similar disposals in the previous six years. If there have, TCGA92/S19 may apply (see CG14650+). If Section 19 does apply, it will increase the consideration for disposals and this can include disposals in earlier years. In Section 19 cases you will need to ask for valuations for any earlier years involved as well as for the most recent disposal.
You should bear in mind that:
- directors of a company are not connected persons unless they are relatives (CG14580) or partners (CG14610).
- a company is not connected with a shareholder unless that shareholder, either individually or together with persons connected with him, controls the company.
But transactions between directors or between a company and its shareholders may still not be bargains at arm’s length, and so may require the substitution of market value for actual proceeds under TCGA92/S17 (CG14540+).
A purchase of own shares by a company is not necessarily a ‘connected persons transaction’ within the scope of TCGA92/S18. Whether it is or not will depend on whether the purchasing company and the shareholder making the disposal are connected persons as that term is defined at TCGA92/S286, see CG14580+. If TCGA92/S18 applies, or if the transaction is not a bargain at arm’s length, you will need to obtain a valuation form SAV.