Agreeing the Business Valuation for Tax Purposes

Please note that the valuation produced by The Business Valuer™ software cannot be relied upon for taxation purposes unless further work is carried out to agree the value of the business with HMRC Share and Assets Valuation Division.

If it is important that the valuation is agreed for tax purposes, then it will be necessary to submit the valuation report to the Share and Assets Valuation division of HMRC in order to obtain their approval on the valuation for tax purposes.

However, it must be stressed that care must be taken in the preparation of the report.

This is because the earnings basis is the dominant valuation method used in the majority of cases and is the one you are most likely to adopt for a trading business that is a going concern. However, it is very important to recognise that other valuation methods may be more appropriate in certain circumstances or when valuing a specific business share. It may be the case that a combination or hybrid of two or more of the methods may result in a more fairer valuation or can assist with proving the chosen “valuation” further.

It is worth noting that whatever method is chosen the HMRC have the right to challenge the chosen valuation method and are at liberty of choosing an entirely different method so therefore it is in the interest of the business owner to know all the possible valuations and therefore to calculate them and be prepared in advance.

If no consideration is given to this then a disaster is waiting to happen.