Erdal decision alters minority share valuation

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Jennifer Adams
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The year 1982 means different things to different people - Argentina invaded the Falklands and Bucks Fizz was top of the charts. For accountants 31 March 1982 in particular means the date from which the rebasing provisions to Market Value apply for an asset held at that date.

30 years - who refers to records going back 30 years? Apparently the Revenue should and were criticised for not doing so in a recent Tribunal case.

S Patrick Erdal v HMRC (TC00964) should be read by every accountant and minority holding shareholder of an unquoted company for the case was brought to decide the March 1982 valuation of shares so held. In so doing the Tribunal confirmed a list of principles and method of calculation.

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18th Apr 2011 12:14

1982 valuations

What are you supposed to do when:

the company's sole director has long since died;

your firm was not appointed until after the death of the previous accountant, whose successors never received any records;

the statutory minutes don't go back that far; and

HMRC have destroyed most of their subsequent CT files?

The only information you have is from Companies House - abbreviated accounts either side of 31.3.82. The abbreviated accounts disclose, at cost, freehold property (no record of address, let alone tenancy details) and unspecified listed investments. 1982 valuation was difficult enough when I had to agree a value in such circumstances about 15 years ago. It will now be impossible for many more companies. Why has CGT not been rebased?

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18th Apr 2011 13:33

Would it have been different?

If Mr Erdal had been represented...quite possibly, although he did well with providing so much evidence on the company. Given the amount of tax at stake, it is odd that he did not appoint his own expert.

More importantly, as this is a First Tier decision it does not I understand, set any precedents for fiscal valuation, aside from which the tribunal recognised that discounts will vary over a considerable range and then it proceeded to ignore them because it had already considered the discount in terms of the basic valuation. It is also a March 1982 case so there is always going to be more guesswork. As the judges say though "each case must depend on its own particular facts and circumstances". I am sure that another tribunal or another expert would come up with a different figure.

Virtual tax support for accountants:



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18th Apr 2011 13:55

Nostalgia isn't what it was

I think this case and the previous post raise an important point.  Just when do we draw the line and re-rebase?

As an old un I remember that the 1982 rebase was because it was considered a problem that we were still using 1965 values 17 years on.  Well here we are nearly thirty years on and still batting with the 1982 values!

As the previous poster found, getting information for 1982 can be extremely difficult.  Applying a 1982 mindset in 2011 can be even harder.

Whilst some things don't change, recession, waging war in a far away land and Duran Duran, we now have a revolution in available information via the Internet.  It is hard to conceive in this internet age that in 1982 the government appointed its own newsreader to report nightly on the Falklands War to control what was said, how it was said and to avoid any BBC "spin".  Both unthinkable and impossible in 2011.

Proprietor/Shareholder expectations have radically changed since 1982, today a forty something business owner will have a very different view of his business compared to his equivalent in 1982.  People generally seem much more "savvy" and questioning of situations than they did back in 1982.  This must in turn affect the 1982 valuation process. 

Incidentally if you can remember what happened at the end of Buck's Fizz's Eurovision Song contest piece (in 1981 rather than 1982) it highlights two things:

1)  Your memory is not as bad as you thought;

2)  That times have changed as this seemed slightly risque then!

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18th Apr 2011 14:01

Abbreviated Accounts

I started training in 1985 and I don't recall abbreviated accounts being in existence at that time....

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18th Apr 2011 14:13

Abbreviated accounts
Tim - In those days IIRC they were called 'modified' accounts.

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18th Apr 2011 17:26


 Useful to know that a majority shareholding is worth more than a minority one. Principles such as this are invaluable.

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By dicon
25th Apr 2011 13:37


The Tribunal used comparable P/E ratios which they correctly described as the market capitalisation divided by the net profit after tax.

But they then multiplied the pre-tax profits by a P/E ratio of 14 to arrive at the share values.

Why did they not use after-tax profits to be consistent?

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