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HMRC internal manual

Shares and Assets Valuation Manual

From
HM Revenue & Customs
Updated
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Liaison with Valuation Office Agency and other offices: Milk Quotas

The aim of the milk quota system is to limit the supply of milk within the EU and is in effect a producer’s right to sell a fixed number of litres of milk a year without having to pay a levy. A producer can be an individual, a partnership or a company farming as a freeholder or under a tenancy or licence. A milk quota (MQ) may be bought separately from land and may be valued as a separate asset.

Valuers should consider the question of the existence of an MQ where a company has an interest in land which is used for dairy farming purposes. The present system was introduced in 1984 and so is irrelevant to March 1982 valuations. Moreover, because of the availability of 100% Business Relief/Agricultural Relief, valuations of milk quota are now only rarely required for IHT purposes.

The EU agreed to abolish MQs by 2015 on 21 November 2008. As a result, the value of MQ for sale fell substantially and became of little value after that date. MQs after 21 November 2008 may be regarded as worthless. If in doubt, seek advice from the SAV Bloodstock team.

The SAV Bloodstock team can also provide values of MQ for risk assessment purposes prior to November 2008.

Where it is, or may be, appropriate to assess the value of a shareholding by reference to assets, the procedure set out at SVM115130 below should be followed.

Where the shareholding being valued is so small and uninfluential that it is clear that a discounted assets basis of valuation is inappropriate, the effect of an MQ is to limit the inroads of the milk levy into the company’s profits. This is likely to provide a relatively peripheral point which need not be investigated except where the shareholder is also owner or part-owner of the land farmed by the company, when the procedure at SVM115130 (second section) should be adopted.

If, on the facts of a particular case as known, however, valuers consider that the levy/MQ could be a material factor, the case should be referred to the Team Leader.

  Additional Guidance: SVM150000