The Statutory Open Market: Case Law - issues surrounding liquidity in shares
The extent to which transactions in shares of a particular company listed on a recognised stock exchange may be taken into account in determining a fiscal valuation was considered by the FTT in both Nicholas Green v HMRC  UKFTT 396 (TC) and Jonathan Netley v HMRC  UKFTT 0442 (TC).
Both were cases involving valuations arising from gifts of shares to charities.
Nicholas Green v HMRC  UKFTT 396 (TC)
In this case the shares in question were initially subscribed for in a shell company which subsequently acquired an existing trading company and then immediately the shares were listed on the Channel Islands Stock Exchange (CISX) with the listed price implying a significant uplift in the trading company value. The gifting price was based on the listed price which was in turn derived from the placing price on CISX (approximately four times the original subscription price paid shortly before the listing date) and two transactions on CISX. HMRC contended the listed price emerging from these share dealings was not a proper measure of market value.
The decision of the FTT concurred that the listed price was not indicative of market value. The case was instead decided based on the underlying trading company value following a full valuation exercise.
Jonathan Netley v HMRC  UKFTT 0442 (TC)
The broad facts here are similar to the above case except the shares in question were listed on the Alternative Investment Market (AIM). The FTT decision in this case was also to look away from the listed price. The tribunal judge held there was insufficient liquidity in the market for the company’s shares for the listed price to be taken as a proper measure of market value. The judge looked at a separate commercial transaction that occurred just before the shares AIM listing as his benchmark for valuation.