The UK tax authority HMRC has published new valuation rules in respect of the valuation of shares for capital gains tax (CGT), corporation tax and income tax purposes. The rules which apply from 6 April 2015 are in the Market Value of Shares, Securities and Strips Regulations 2015 (SI 2015/616). For most CGT purposes the valuation is to be based on the figure half way between the lower and higher prices on the relevant day.
The SI 2015/616 does not apply to inheritance tax (IHT), so the share valuation rule for IHT remains the same as before. When valuing shares for IHT it is still acceptable for the taxpayer to use the quarter up rule – adding one quarter of the difference between the lower and higher price of the share on the relevant day to the lowest price. This means that there is now a difference between the share valuation rules for CGT and IHT.
The position is to be clarified in HMRC guidance. HMRC is looking at the impact of the valuation changes before aligning the valuation method for IHT with the valuation method for CGT and the other taxes. HMRC is looking for comments from practitioners and representative bodies on the effect of the valuation changes.
