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HMRC internal manual

Shares and Assets Valuation Manual

The Statutory Open Market: Case Law - Information Standards

The most important decisions to date have been the Yorkshire Switchgear cases of Caton deceased v Couch (HMIT) and Clark deceased v Green (HMIT). There is a summary of the facts and the decisions at SVM114060.

In Stephen Marks v HMRC [2011] UKFTT 221 (TC), which concerned the valuation of two French Connection group holding companies at 31 March 1982, an issue arose concerning the provision of information that a prudent prospective purchaser would reasonably require but which was not in fact available. HMRC assumed that it was unlikely that reliable financial information about the smaller of the holding companies would have been available to the prospective purchaser on 31 March 1982. The appellant argued that the purchaser would not be subject to the unsatisfactory state of the accounting information of French Connection Overseas Ltd and assumed that the correct information would be provided. This argument was based on the statement of the Special Commissioners in Hawkings-Byass v Sassen [1996] STC (SCD) 319, 333:

“Experts and we ourselves alike are at a serious disadvantage through the accounts of GB Cayman being so unreliable. A real potential purchaser in the market on 31 March 1982 would have had the accounts restated.”

In the Stephen Marks case HMRC contended that only information actually available was assumed to be provided. The tribunal agreed and said:

“It is inherent in the hypothesis that the information is available to be supplied. The assumption relates to the information that he might reasonably require if he were proposing to purchase the asset from a willing vendor by private treaty and at arm’s length. If one assumes a sale by private treaty the purchaser cannot be put in a better position than the seller if the seller does not have the information that the purchaser reasonably requires. The quotation from Hawkings-Byass relates to what a real purchaser would have done; the hypothetical purchaser has to take the company in its actual state”.

For further guidance on Information Standards, see SVM114010 et seq.

  Additional Guidance:SVM150000