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Valuing shares for tax purposes is not the same as valuing a company for a trade sale. HMRC's Shares and Assets Valuation (SAV) division has strict, legally defined methodologies that must be followed. Get it wrong, and your employees could face unexpected tax bills.
When dealing with HMRC, value is dictated by statute and case law. The valuer must assess what a hypothetical "prudent purchaser" would pay in the open market, using only the information that would be reasonably available to them at that specific date.
Crucially, when issuing options or shares to employees, you are usually issuing a small, unlisted, minority stake. These shares lack control and are difficult to sell. At Consult EFC, we apply robust, defensible discounts to the enterprise value to ensure the lowest legally permissible strike price for your team.
Every report submitted to HMRC is prepared and personally signed off by Kish Patel, ICAEW Chartered Accountant.
Actual Market Value (AMV)
The value of a share after taking into account any restrictions placed upon it (such as bad leaver provisions or transfer restrictions in your Articles of Association). This is the price used to set the exercise price for EMI options.
Unrestricted Market Value (UMV)
The value of the share ignoring any restrictions. HMRC requires this figure to ensure no individual employee exceeds the £250,000 statutory limit for EMI options, and the company does not exceed the £3 million overall limit.
Minority & Illiquidity Discounts
A 1% shareholding is not worth exactly 1% of the whole company. It lacks voting control and cannot easily be sold. We apply heavy (often 50-75%) discounts to the pro-rata value, which HMRC SAV accepts when properly justified.
Any time shares in an unlisted company change hands between connected parties, or are given to employees, HMRC will want to know the market value to assess income tax or capital gains.
Enterprise Management Incentives (EMI) are the most tax-efficient way to reward staff. We secure pre-agreement from HMRC SAV on your option strike price so your employees are protected from retrospective income tax charges.
When companies outgrow EMI limits, growth shares allow employees to share in future value. We calculate the required "hurdle rate" to ensure the shares have a low initial value, preventing upfront tax charges.
If you transfer shares to a connected party (like a family member or a trust), HMRC treats it as a sale at market value. We provide the defensible valuation needed for your self-assessment tax return.
For other HMRC-approved share schemes like Company Share Option Plans or Share Incentive Plans, establishing a formal market value is a statutory requirement to ensure compliance.
If you simply gift shares to an employee outside of an approved scheme, HMRC treats it as employment income. A robust valuation ensures you accurately calculate the PAYE and National Insurance due.
Executors must value unquoted shares at the date of death for Inheritance Tax purposes. We provide SAV-compliant reports to ensure the estate is assessed accurately and fairly.
HMRC SAV will not accept a valuation based on "gut feel" or your last funding round. We build our reports using HMRC-approved valuation methodologies, ensuring smooth agreement and minimal pushback.
We take the stress out of dealing with the taxman. We handle the entire process, from data analysis to direct negotiation with the HMRC valuer, until agreement is reached.
We spend 30 minutes understanding your cap table, any recent funding rounds, and the size of the option pool you want to create. We confirm a fixed fee for the entire HMRC process.
We gather your accounts, forecasts, Articles of Association (to check for restrictions), and details of any past share transactions. HMRC requires specific documentation, and we make sure nothing is missing.
We determine the enterprise value, then explicitly calculate the Unrestricted Market Value (UMV) and Actual Market Value (AMV), applying aggressive but legally sound discounts for minority status.
We talk you through the report and the numbers. Once you are happy, we prepare the HMRC VAL231 form (the official application for EMI valuation agreement) ready for your signature.
We submit the comprehensive report and VAL231 form directly to the Shares and Assets Valuation division in Nottingham. SAV typically takes 2-4 weeks to review the submission.
If the HMRC valuer pushes back, we handle all technical negotiations on your behalf. We defend the methodologies and discounts used until final written agreement is reached.
Once we submit the VAL231 form and our report, HMRC typically responds within 2 to 4 weeks. Because we provide comprehensive, well-structured reports upfront, we often receive outright agreement without protracted correspondence, keeping the timeline as short as possible.
Unrestricted Market Value (UMV) ignores any restrictions on the shares and is used to check you haven't breached the £250,000 per employee EMI limit. Actual Market Value (AMV) takes into account restrictions (like bad leaver clauses) and is therefore lower. AMV is the crucial number, as it determines the strike price of the options.
No, and doing so will result in an artificially high strike price for your employees. Investors usually buy Preferred Shares with liquidation preferences and anti-dilution rights. Employees usually receive Ordinary Shares. We calculate the significant discount between the two, meaning your EMI strike price should be much lower than your last investment round price.
We operate on a strictly fixed-fee basis. The fee covers the valuation, the report, the VAL231 preparation, and handling all correspondence with HMRC until agreement is reached. We will quote you the exact fee on our initial discovery call before you commit to anything.
It is normal for SAV valuers to ask technical questions or challenge discount rates. Because we build robust, evidenced reports from day one, we are fully equipped to defend the valuation. We manage this entire negotiation process as part of our fixed fee.
