Tax Valuations

Tax valuations are important because they can drive the tax charge. Tax valuations are different from other valuations and must be performed within certain parameters which are derived from a body of case law going back 120 years. Deloitte’s Tax Valuations team offers a deep specialism in the valuation of unquoted business assets, including shares and intangibles, and the negotiation of values for these assets with HMRC.

Deloitte’s Tax Valuations team

Deloitte’s Tax Valuations team focuses on:

  • Understanding the correct parameters for the valuation, and using them to present and defend an appropriate range of values.
  • Leveraging our extensive experience of HMRC practice to advise clients what HMRC can be expected to say about value – not what we think they ought to say, but what we know that they are likely to say, based on thousands of previous cases.
  • The ability to act as a powerful representative for taxpayers in negotiations with HMRC, because we understand the relevant case law, and know what HMRC has said in similar situations previously.

What is Tax Valuation advice?

Deloitte’s Tax Valuation team can provide the following services:

  • Helping taxpayers understand the value that tax authorities are likely to place on business assets so that they can plan accordingly. This includes intangibles, private companies, private company shares, partnership interests and more. Valuations for tax purposes can differ widely from valuations performed for other purposes, and so it is important that taxpayers take specific tax valuation advice at an early stage.
  • Negotiating values for business assets with the relevant tax authorities on behalf of taxpayers.

There are several different definitions of value for UK tax purposes, depending on the relevant charging provision. Each definition can deliver a substantially different value for the same asset, meaning that there is a different tax outcome if the wrong definition is applied in any given situation.

Each definition is supported by a different mix of the statutory framework, case law, precedent and practice. It is important that valuations for tax purposes are performed by specialists who thoroughly understand these distinctions. A valuation which delivers ‘fair market value’ will, at best, be a rough approximation of the correct definition of value for tax purposes.

Other definitions of value may be in point in non-UK jurisdictions.

Corporate and Intangible Valuations

Deloitte’s Tax Valuations team has a wide range of experience in providing tax valuation advice to companies, including advice in respect of:

  • The market value and/or arm’s length provision of intangible assets which fall to be adjusted for tax purposes;
  • Which of the two definitions of value are in point for each intangible asset transfer;
  • The market value of intangible fixed assets, which give rise to de-grouping charges on the disposal of a subsidiary;
  • The arm’s length provision of intangible assets transferred, in support of tax-deductible amortisation;
  • Negotiating and agreeing the market value and/or arm’s length provision of intangible assets with HMRC;
  • The market value of companies or shares where Substantial Shareholding Exemption is not available;
  • Identifying and categorising companies’ intangible assets into pre and post FA 2002 assets on corporate restructurings and trade and asset sales; and
  • The fair market value of assets where an overseas jurisdiction requires that the transfer of an asset is taxed.

Private Company Services

Deloitte’s Tax Valuations team has a wide range of experience in providing tax valuation advice to individuals, partnerships and family-owned companies including advice in respect of:

  • The market value of respective shareholdings in connected party reorganisations;
  • Negligible value claims;
  • March 1982 valuations; and
  • The market value of taxable business assets for estates passing on death, chargeable lifetime transfers and potentially exempt transfers.

Global Employer Services

Tax valuation is critical to the successful operation of management incentives in a private company, not least because it forms the basis of any gains to be realised by participants.

With the exception of tax advantaged share schemes, HMRC no longer offer taxpayers the opportunity to agree employee share valuations, meaning that it is essential to hold robust documentation on file in case of tax authority scrutiny or to support the position taken for future due diligence, both of which may not occur until some time after the valuation date.

Deloitte’s Tax Valuations team is the market leader in assisting with the design of, and preparing valuations for, management incentives and highly geared securities.

The team has completed circa 2,000 valuations of management incentives and, when it was possible to do so, secured over 1,200 valuation agreements with HMRC under the Post Transaction Valuation Check service.

Publications and Tax Valuations Network

The Deloitte Tax Valuations team regularly connects with a network of professional tax and legal practitioners who frequently encounter situations where tax analysis is driven by valuation issues. We run seminars, release regular publications and keep our members up to date with the latest news in tax valuations.

Subscribe to the Deloitte Tax Valuations network or recommend a contact here.

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