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Market value of shares in small family business

Transfer of shares to son

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Hi all, 

My client which is a small family roofing company comprising father and son, wish to transfer father's 40% shareholding to son. Net assets currently 100K, mainly cash and reserves. Without getting a full valuation done how would it be best to value the father's shares at market value for the transfer for potential CGT and/or gift holdover relief.  I have read somewhere that for very small companies MV would be little different to nominal share value (£1) ?

Many thanks

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By 356B
11th Feb 2021 15:12

With £100k of assets it can't be the nominal share value, it will have to include all assets. If no Goodwill (or other undervalued assets) then you could just divide the total net assets by the shares issued to arrive at a value.

Thanks (1)
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By Martin B
11th Feb 2021 15:22

If you are going to make a hold over election, I don't think you need to get the company valued as the based cost is taken over by the son.

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Replying to Martin B:
My photo
By Matrix
11th Feb 2021 15:24

I thought you had to put the valuation on the form.

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Replying to Matrix:
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By Wanderer
11th Feb 2021 15:55

You don't need to compute the gain if you follow:-
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg66891

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Red Leader
By Red Leader
11th Feb 2021 15:55

Net assets can't be cash AND reserves.

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RLI
By lionofludesch
11th Feb 2021 16:13

"I have read somewhere that for very small companies MV would be little different to nominal share value (£1) ?"

I'd be interested to know where you read that.

But I'll offer you £1 for your company with £100k of assets.

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Hallerud at Easter
By DJKL
11th Feb 2021 16:13

Does Dad have a spouse?

Given £100k assets, which hopefully are all needed for the trade so can likely be ignored re the valuation (NAV basis for a trading company seems flawed to me as a valuation approach) and depending upon earnings/profits, and given only a 40% stake to be taken into account, a normalised EPS approach to valuation may make a sale using two annual allowances at circa £24,600 more efficient for the son in the future, giving a base cost re the shareholding going forward.

Of course does depend on the business, it earnings, its size,how employee driven how much unpaid work by owners driven etc.

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Replying to DJKL:
RLI
By lionofludesch
11th Feb 2021 16:26

DJKL wrote:

Does Dad have a spouse?

Or a civil partner ?

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
11th Feb 2021 16:41

I presume so, take my "spouse" as shorthand.

My point is really one should look at the particular company details to determine the art of the possible, holdovers may be convenient but they are not always efficient.

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