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PII for valuations

PII for valuations

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Hi all,

A client of mine (limited company, 3 shareholders) is looking to have one of the shareholders sell his shares to the other two shareholders. To calculate the appropriate CGT implications, they would of course need to know that market value of those shares are, and in order to do this, they'd ideally go through a valuation process. 

I want to do this for them, but I noted that my PII schedule states that I cannot do '...Other corporate finance work'. 

I wanted your view on whether this would be corporate finance work, as it's a valuation, or just tax work, for which I do have PII cover, in order to get the correct CG liabilities.

Thanks

Oliver

 

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24th Apr 2019 08:12

Someone’s going to say it, so I might as well “if you need to ask ...”.

Personally, I wouldn’t say it falls under CF - my insurance policy specifically asked if I did valuations. Equally, I wouldn’t say it was tax work, where your starting point would be the valuation.

If I was you, I’d ask the insurers.

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to atleastisoundknowledgable...
24th Apr 2019 09:21

The advantage of asking the insurers is that you would have a case under estoppel if they tried to change their minds. Otherwise you are merely relying on opinion and I don't think you would get a duty of care for comments on a forum. (by substantially anonymous people).

I am, however, neither a lawyer nor an accountant.

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24th Apr 2019 09:07

You can explain the tax implications of a sale without knowing the sale price - how to calculate the gain, what rate of tax, what annual exempt amount etc. If you get involved in providing a valuation opinion before the parties have concluded their negotiations you will be drawn into advising them on the negotiations - with the obvious issue of not being able to advise both sides at the same time.

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By DJKL
24th Apr 2019 10:42

Are the shareholders "connected" as if not then professional valuation is probably irrelevant and they just need to arrive at an agreed price.?

You can prepare a range of sale figures and tax calcs re each outcome using excel pretty quickly (copy/paste) which gives them the broad outline of the tax over a range of prices whilst not placing yourself in the position of dictating valuation.

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By ocooper
to DJKL
24th Apr 2019 20:47

Thanks DJKL.

I had, mistakenly, thought that they were, given that they are directors of the same company. However, I understand now from CG14623 that in fact, they are not, and therefore you're absolutely right, whatever price they agree is the figure used for calculation of the CG.

I was thinking all along that because they were connected, the disposal would be treated as being at market value, but I realise now that this is a red herring.

Thanks for your help everyone.

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