Share Valuation Test Case

6th June 2015

Mr & Mrs Foulser v HMRC: interesting test case on valuing shares in unquoted company.
Business owners may only have to value shares in their family company on a few occasions during their lifetime (eg for commercial share transfers, gifts or capital taxes calculations), but the numbers involved are likely to be material. So a recent test case is helpful in shedding further light on what the Courts consider to be the correct basis for such valuations.

In this case, as you would expect, both parties advanced arguments in support of extreme valuations (initially £14m apart). The taxpayer wished to use the BDO P/E index applied to an adjusted maintainable profit figure, whilst HMRC wished to use a P/E multiple extracted from a simple quoted business. Further differences existed concerning control premiums and minority shareholding discounts. The Tribunal found flaws in both valuations, although favoured the HMRC basis, with adjustments for the discounts applied.

As always, information is king, and this example further helps our predictions on how Courts might arrive at other future unquoted share valuations.

Blog entry by: Andrew Winearls.



 
Other items in Blogs
 
Ian Piper
18th January 2019 CryptoCurrency Taxation: HMRC close loophole?

HMRC are not known for being ahead of the curve, so trying to find official guidance on how exchange gains from selling bitcoin, and other crypto currencies, is expected to be self-assessed and taxed, was always going to be ‘problematic’. At the time of first researching this, the latest HMRC guidance was published in 3…

Read More »

Peter Brown
13th January 2019 5 things you need to know about Making Tax Digital

  Making Tax Digital (MTD) is the hot topic this year. It’s one of the most fundamental changes to the UK tax system since the introduction of self-assessment. From April 2019, VAT registered businesses with a turnover of over £85,000 will be required to keep records using software approved by HMRC.  We have condensed the…

Read More »

Stephen Malkin
11th January 2019 Financing your self-build project

  Borrowing to build Self-builders require more money up front than conventional homebuyers. This is because they have to buy their building plots and fund their planning applications before they can apply for any loans. Self-build mortgages tend to be interest-only as fixed-rate loans have substantial exit fees for those who change loans when the…

Read More »

Stuart Kierman
9th January 2019 Running A Business From Home

  If you are looking to start up a business, it is likely to be home based, at least in the early days.  Figures suggest that over 60% of businesses start in this way and that there are 2.9m businesses in the UK operating from home. This blog looks at some of the common questions…

Read More »

Richard Alecock
21st December 2018 Making Tax Digital …… Only 100 days to go!

It’s time to decide how you will digitalise your records in order to meet HMRC requirements ahead of April 2019 HMRC wants the UK to be one of the most digitally advanced tax administrations in the world, improving efficiency, effectiveness and ease of compliance. Their plans signal the end of paper accounting for millions across…

Read More »

Ian Piper
19th December 2018 A Taxing Christmas?

Business owners, like the rest of us, will be all too aware that Christmas is a ‘challenging’ time. A short working month usually means less production, less sales and less payments from customers. Add to this cost of staff Christmas bonuses, various festive jollies and large tax bills just around the corner in January, and…

Read More »