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Valuation of these shares for IHT purposes


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Company owns an commercial investment property recently valued at £1m.  There is no debt, so the net assets of the company are c£1m also.

Father owns 55% of the shares, the other 45% being owned by an estranged uncle.

Father is widowed and has other assets in his estate that are in ecxess of the Nil Rate Bands. He is minded to gift shares with a value of £331k into a dicsretionary trust for his children / grandchildren. 

Valaution - A property investment company is normally valued on an asset basis... Taking this further, on a simple pro rate basis (with no discounting) this would suggest he could gift a 33% shareholding.  However, the loss to donor principle is to considered.  Ultimately he will be gifting control of the company.  Can readers suggets an acceptable IHT valuation and therefore an amount of shares to gift into trust in these circumstances?

(CGT relief under s260 is to be claimed)




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By Portia Nina Levin
07th Sep 2017 11:37

I wouldn't try and get a valuation of exactly £331K. Be content with £300K, then even if it gets argued up you have some wriggle room.

100% of the company is, on the face of it, worth £1 million. You might be able to discount that value for perhaps 20%-30% of any latent CGT on the underlying property though.

55% of the company is worth £550,000 x 90% = £495K, applying a 10% discount (which is realistic).

So now you need to work out how much of the company is worth £195K (£495K - £300K). Let's assume a 35% discount; that's £300K.

So let's assume we want to end up with a 30% interest (25% interest gifted); that's £300K x 65% = £195K, with a 35% discount, giving a loss to donor of £300K.

Or, you could push it to a 29% interest remaining (26% interest gifted); £290K x 65% = £188.5K, with a 35% discount, giving a loss to donor of £306.5K.

Or you could push it even further to a 28% interest remaining (27% gifted); £280K x 60% = £168K, with a 40% discount, giving a loss to donor of £327K.

How averse to risk are you? and how willing is your client to risk paying a little bit of tax?

Or, maybe he could pick himself up a nice little Philipino bride, that will do exactly what she's told.

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