is stamp duty payable on inherited shares

salinia

Is stamp duty payable on shares inherited?

James,_Oxford

I'm no expert on this area but I'm prepared to kick things off.

Valuing shares in not an exact science. It depends on the nature of the business. Some companies can be valued by simply looking at the balance sheet and taking the net asset value. Other companies have a value based on their earnings ability, so you would take a multiple of the annual profits, and this multiple depends on the sector.

The bottom line is basically how much is anyone prepared to pay for the shares. Ask yourself - being as objective as possible - how much cash would you have parted with for the shares (6 months ago).

salinia

Thanks for the reply I don't think anyone noticed, but I put my decimal point in the wrong place...anyway it looks like valuation equals money in the business accounts less liabilities debtors/corporation tax plus value of assets business tools etc plus value of property divided by how many issued shares equals the share price so it fairly straightforward...I asked about any taper relief and that does'nt enter into it...marketability mmm?

Elaine_Wilson

With a 100% shareholder the asset value will be the main factor to take into account in determining the value. Don't forget there may be a value attached to goodwill.

What has happened to the business over the last six months? Is it continuing to trade? If it has been wound down then the breakup value could be used. If it will continue then a going concern approach will be appropriate which will mean taking into account the value of any goodwill.

A minimum value will be the amount an investor could realise if they bought the company and immediately wound it up. I agree with James that you need to consider what a potential purchaser would have paid.

To give you a flavour of how the Revenue may approach this I have calculated valuations of small private companies in this way. I calculate four values based on different elements of the business. First the value based on the assets. Then the value based on the earnings. This involves adjusting the profit figures to allow for items such as salaries which may not be at the market rate. Then a weighted average is calculated from the last three or five years and an appropriate p/e ratio used to get the capitalised value. The other two are based on the dividends paid and any recent sales of shares which are normally not relevant in small companies.

I then calculate the company's value by weighting these valuations (say, 90% asset basis and 10% earnings). This gives some impressive calculations to show clients. But, this value is then tweaked to allow for the individual circumstances of the company. Such as - development potential of the site, changes in technology, new competitors, that sort of thing. As a result of all this the final value is far from scientific.

Not much practical use to you but hopefully may get you thinking of factors which affect the valuation.