Business Valuation Reports: What Makes Them Credible?

A credible business valuation report explains how the figure was reached, with a clear purpose, valuation date, suitable methods and documented evidence. A convincing headline number won't carry much weight if the assumptions behind it cannot be explained.

HMRC, investors and buyers may review the same business for different reasons, under different valuation requirements. Your report needs to distinguish those requirements and connect each material judgement to supporting records.

Start by defining what is being valued, why it's being valued and who will rely on the conclusion.

What makes a business valuation report credible to HMRC, investors and buyers?

Credibility comes from a clear scope, suitable analysis and reliable information. The reader should be able to trace the conclusion through the calculations to the underlying records.

The report should also identify its preparer, intended users and limitations. Professional accountability matters, alongside the quality of the working papers.

Set out the purpose, valuation date and interest being valued

A sale, funding round, tax event and employee share scheme can require different instructions. Record the purpose before choosing a method.

For tax share valuations, the applicable legislation determines the basis of value. Capital Gains Tax and Inheritance Tax generally use a statutory open-market value: the price obtainable in a hypothetical sale at the relevant date. The precise assumptions and any special rules must be checked for the tax event. HMRC’s statutory valuation principles explain the relevant definitions.

Identify the share class, number of shares, ownership percentage, voting rights, dividend rights and transfer restrictions. Our guidance on HMRC private company share valuations explains why those details affect the analysis.

The valuation date anchors the evidence. Later developments shouldn't be treated as though they were already known.

Use methods that fit the business, and cross-check the result

Earnings multiples assess sustainable profit against relevant market evidence. Comparable transactions can inform that assessment, but differences in size, growth, risk and deal terms need explanation.

Discounted cash flow assesses expected future cash flows, discounted for timing and risk. Its usefulness depends on credible forecasts and consistent assumptions.

Asset-based methods assess underlying assets and liabilities. They can be relevant for asset-heavy businesses, but may miss value generated by customer relationships or other intangible assets.

Our three approaches to defensible valuations provide more detail. Cross-checks should test the conclusion, rather than mechanically average incompatible results.

Where analysis starts with enterprise value, show the bridge through cash, debt and relevant adjustments to equity value.

Dividing equity value by the total share count doesn't establish the value of every share class.

Why clear assumptions and documented evidence matter

A model can calculate an answer from weak inputs. It cannot make those inputs reliable.

Documented assumptions make the business valuation report easier to review, challenge and update. They also distinguish management's expectations from independently supported evidence.

Build an evidence trail from company records

The supporting file should connect statutory accounts, current management accounts and forecasts. Explain differences in reporting periods, accounting treatments or revenue recognition before using the figures together.

Share valuations also need the cap table, articles of association, shareholder agreements and relevant option documents. These establish the interest being valued and the rights attached to it.

Customer contracts, loan agreements, funding documents and previous share transactions provide further evidence. Signed contracts and an uncommitted sales pipeline carry different evidential weight.

Our business valuation preparation guidance sets out the practical starting point for assembling these records.

Keep dated versions of forecasts and working papers. The evidence should reflect information known or reasonably available at the valuation date, rather than a forecast rewritten after the outcome became clear.

Explain forecasts, adjustments and uncertainty plainly

Revenue growth needs an operational explanation: customer acquisition, retention, pricing, capacity or contracted work. Margin assumptions should reflect delivery costs, recruitment and the investment required to support growth.

Cash flow forecasts need working capital and capital expenditure, alongside reported profit. For discounted cash flow, explain the discount rate and longer-term growth assumptions.

Normalisation adjustments need the same discipline. An exceptional legal-cost add-back requires supporting records and a reason it won't recur. Owner remuneration adjustments should account for the cost of replacing the role.

Material estimates, missing information and reliance on management representations should be visible. Sensitivity analysis can show how changes in key assumptions affect value.

A range may be more informative than a precise figure where uncertainty remains significant.

Tailor the report to HMRC, investors or buyers

The underlying records may support several discussions. The valuation basis and report scope still need to match each audience's purpose.

Prepare the right HMRC evidence for the tax route

HMRC routes vary. VAL231 is used to seek agreement for EMI share valuations before grant. Where restrictions affect value, proposals should address actual market value (AMV) and unrestricted market value (UMV).

An agreed EMI valuation is normally valid for 90 days from the agreement date, provided relevant circumstances don't change. See HMRC’s EMI valuation guidance.

CG34 is the post-transaction valuation check route for relevant capital gains valuations. It follows the disposal and precedes filing the return. The form asks applicants to allow at least three months before the filing deadline. Read the CG34 application requirements.

These routes aren't interchangeable. Supporting evidence and timing depend on the case, and HMRC may request further information or propose another figure.

Make commercial value easier to test in due diligence

Investors and buyers assess sustainable earnings, cash conversion, customer concentration and forecast support. Contracts, recurring revenue, debt obligations and business risks help them test whether the valuation is commercially supportable.

A buyer may also assess integration costs, management dependency and the proposed payment structure. Deferred consideration and earn-outs affect what the seller receives and when.

Those commercial considerations remain distinct from HMRC's statutory tax basis. Our fundraising due diligence checklist helps founders organise the evidence for investor review.

Check the report before sharing it

Confirm the scope and date. Reconcile figures to source records, explain adjustments and disclose limitations. The conclusion should follow from the analysis without unsupported assumptions.

At Consult EFC, we scope valuation work around the purpose and deliverables. The engagement identifies the information required, reporting work, submission support and follow-up included.

Frequently Asked Questions

Does a credible valuation report guarantee HMRC agreement?

No. Clear evidence and a well-supported method strengthen the case, but HMRC may request additional information or suggest another value. Agreement on an EMI share valuation also doesn't establish that every company, employee, option and reporting condition qualifies. Those requirements need separate attention.

Can I use one valuation report for tax, investment and a sale?

Some analysis can be reused, but the basis, date, share rights and permitted reliance may differ. Define the intended uses before commissioning the work. A report prepared for one purpose shouldn't be presented as covering another without assessing whether its instructions and conclusions remain suitable.

What records should I gather before a valuation?

Gather recent statutory accounts, current management information, forecasts, the cap table, share documents, material contracts and relevant funding or transaction records. Include cash, debt and major commitments. The exact pack depends on the company and purpose, so identify missing records early rather than conceal gaps with estimates.

Why can different valuation methods produce different figures?

Methods use different evidence: current earnings, expected cash flows or underlying assets. They can also capture different risks and depend on different assumptions. The report should explain why the selected method suits the business and how cross-checks were used, rather than treating every result as equally reliable.

How should I treat a recent funding round when valuing shares?

A funding price is relevant evidence, but it isn't automatically the value of every shareholding. Investor preferences, voting rights, restrictions and other deal terms can distinguish the issued shares from those being valued. Timing and changes in company performance also affect the weight placed on that transaction.

Make the valuation traceable

A credible valuation gives the reader an evidence-backed explanation of how the figure was reached. Its strength depends on the connection between the purpose, records, assumptions and conclusion.

For growing SMEs, organising the evidence early reduces uncertainty when tax, funding or sale discussions begin. Define the purpose before commissioning the report, and keep the supporting records consistent.

The report should remain understandable when the person reviewing it starts asking detailed questions.

Related reading: EMI Valuation Before Granting Options: A Founder’s Checklist.

General information as at 29 October 2026. Obtain advice on the specific company, share rights and tax event.