Share Valuations

If you are considering implementing an employee share scheme you will probably need to have your company’s shares valued. Share valuations are critical in working out how many shares or options you would like to award to a particular employee. The price employees pay for their shares will also be important for tax purposes.

HMRC Shares and Assets Valuation is the body responsible for determining the market value of shares in private companies and agreeing your proposed share valuation. A share valuation can be agreed with HMRC before options are granted under an approved share scheme, for example  EMI Options, or after shares or options have been awarded under an Unapproved Share Scheme, to enable a value to be included in self-assessment tax returns.

Information that HMRC can require in agreeing share valuations includes:

• The company’s financial performance. HMRC will typically want the last 3 years’ accounts together with more up to date financial information such as management accounts.

• The current issued share capital of the company and the rights attaching to the shares. Are the shares to be offered to your employees subject to specific restrictions, for example a right of buy-back if he or she leaves?

• Your suggested share valuation and how you have calculated this. What valuation approach was adopted? What assumptions or adjustments have been made?

In order to agree a share valuation with HMRC before the grant of EMI Options you will need to complete and submit Form VAL 231. This details both a proposed unrestricted market value and an actual market value. A valuation agreed for EMI purposes is generally valid for 60 days from the date of agreement.

Everyman Legal can assist with and support you in agreeing a valuation for shares with HMRC and will provide a cost effective service in relation to any type of employee share scheme.