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HMRC internal manual

Shares and Assets Valuation Manual

The Statutory Open Market: Case Law - Introduction

The statutory open market basis of valuation is set out at SVM113010. Given the relative brevity of the statutory provisions, it is hardly surprising that a body of case law has built up over the years to interpret and apply the legislation. The fiscal valuer needs to have a thorough knowledge and good understanding of the legal framework that has been established by both statute and case law.

It is important to put the decisions of the tax tribunals and courts in valuation disputes into proper context. The role of a judge is to apply the law to the facts of a particular case. Having decided how the law operates, the judge then has to settle the valuation dispute by reference to the evidence, including any expert evidence, presented about the asset to be valued. Of course, that evidence will rest on the particular facts of each case as they stood at the valuation date, the valuation conditions and perceptions in place at that time, and the respective views expressed by any expert witnesses. The judge may make law as to the appropriate interpretation of the statutory valuation hypothesis but judicial decisions on particular valuation techniques such as discounts from company value for minority holdings; for unmarketability; or for the possibility of a future sale are not matters of binding law. Many of the cases were decided decades ago and, in the years since, market conditions and valuation concepts will have altered. It is also important to remember that, though legal decisions of the First Tier Tax tribunal may be influential, they are not binding.

Just as it is indolent to seek to reduce share valuation to a few back of the envelope guidelines, it is misleading to think that the decided cases necessarily provide firm pointers for the selection of valuation techniques or data. Of course, they may indeed be interesting and, even, relevant. It is with that warning in mind that the rest of this chapter should be read.

This chapter describes some principles of share valuation that have emerged from the decided cases and includes brief descriptions of the valuation decisions reached in some of the more recent notable cases.

  Additional Guidance:SVM150000