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HMRC internal manual

Employment Related Securities Manual

Valuation Issues

Basis of valuation

Old legislation

In the old legislation (which was rewritten in ITEPA as from 6 April 2003) the value of securities was variously:

  • money’s worth, which is something capable of being converted into money or something of direct monetary value (e.g. ITEPA03/S62 in Chapter 1 of Part 3),
  • what might reasonably be expected to be obtained from a sale in the open market (e.g. Chapter 5 on securities options), and
  • Capital Gains tax value (e.g. Chapter 8 Part 3 on notional loans).

Current legislation

For consistency, FA03/SCH22 ensures that all chapters within Part 7 of ITEPA now use the TCGA value, as does the related legislation on CT deductions in FA03/SCH23. However, the charge on acquisition of securities is still often the money’s worth charge under ITEPA03/S62, unless an election under ITEPA03/S431 is made for the unrestricted market value to apply. In practice, there is rarely any significant difference in value between the money’s worth and CGT bases. Where it is claimed that there is a significant difference Shares and Assets Valuation must be consulted.

Restricted securities

Where restricted securities are involved, the unrestricted market value will usually be higher than the money’s worth or CGT values, which take account of the restrictions.