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minority interest discount

minority interest discount

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what discount is typically applied to a 40% minority shareholding by HMRC in respect of a CGT transaction - 1/3rd of the company value is attributable to an

investment property?

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By johngroganjga
07th Oct 2015 09:18

I have no idea about HMRC but in the real world I would be starting in the region of 50% for the size of the shareholding alone.

The investment property factor makes it easier to argue that down than up.

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By nick farrow
07th Oct 2015 09:31

thanks John

when you say argue down - I assume you meant the discount percentage (50%) down i.e. less discount for the minority so higher valuation

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By johngroganjga
07th Oct 2015 09:33

Yes that's what I mean - the discount down so the valuation up.

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Hallerud at Easter
By DJKL
07th Oct 2015 09:40

Livens indicates for a P/E model

Livens indicates, for a P/E model, the following, for what it is worth:

For info Livens suggests a discount (From quoted P/E)  for a small family company of circa 20% to 40% to quoted P/E

Also then discusses a further discount for size of holding in question of :

100%-90% Nil

90% -75% 5%

75%-51% 10-20%

50%       45%-50% (with no casting vote)

25%-50% 55%-65%

10%-25%  65%-75%

Under 10% 75%-80%

How are you approaching the valuation, on a P/E basis for the overall  company or  on a P/E basis for the trading augmented by the property investment on a discounted net asset basis?

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By nick farrow
07th Oct 2015 09:53

thanks DJKL

the  valuation for the 100% has already been done and agreed on the latter basis - it's just the discount we are "arguing" about

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Hallerud at Easter
By DJKL
07th Oct 2015 10:45

Two parts

nick farrow wrote:

the  valuation for the 100% has already been done and agreed on the latter basis - it's just the discount we are "arguing" about

As you have taken a hybrid approach  re arriving at the 100% valuation are HMRC indicating using different discounts for each part of the valuation, the "trading" element possibly at say 55-60%  but the investment property at a much lower discount? There is possibly  justification in valuing as the sum of two parts each with their own discount.

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By nick farrow
12th Oct 2015 12:18

thanks DJKL

sorry for delay that was exactly how I proposed to deal with it.

 

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