Valuation of shares for probate

RabbitMad

Can anybody help - I'm trying to get shares in a private ltd company valued for probate purposes.

The relative I'm an executor for owned the business 100% and its not a business that will qualify for BPR

Has anybody used a professional valuer that they are happy with and didn't take the mick with their charges?

Savvy_Sue

This is probably stating the obvious, but remember that it's the estate which will pay the valuation fees, not you personally.

Thus if you've obtained a few quotes and find them all outrageous, at least you know that outrageous is the going rate ...

I'm sorry I have no experience in the area of valuing shares.

Hawkeye4aneye

I assume that the relative you are executor for had an Accountant?
If so then I would suggest you ask for their help in this matter, if you have not already tried them. They can provide all the relevant paperwork for any valuation.

I see that he owned the business 100% and that he would not get BPR, can I ask what type of business it was because most businesses get BPR.

If it is mostly made up of properties then that is different, however a valuation of such properties would be more easier to sort out through the letting agent, if they were letting properties.

What is to happen to the business? If it is being sold then whoever is going to deal with this could no doubt give you a valuation on the cheap as they will get their twopenneth when the business sells.

RabbitMad

yes - business deals with commercial property letting and has provide a private mortgage to the leaseholder of one of the properties to allow them to buy it.

As the executor I know that its not my money but as a beneficiary a share of it is. I've had 2 quotes so far in excess of £3K+ vat and £800 inc vat. I'm happy to pay for a valuation that values the company lower than the net asset value and thus reduces the IHT by more than the cost of the valuation. The accountant is only a small one man band type thing and suggested the net asset value as the valuation.

Thanks for your suggestions, I'll see what my solicitor comes back with.

Savvy_Sue

RabbitMad wrote: »

I'm happy to pay for a valuation that values the company lower than the net asset value and thus reduces the IHT by more than the cost of the valuation. The accountant is only a small one man band type thing and suggested the net asset value as the valuation.

Thanks for your suggestions, I'll see what my solicitor comes back with.

I am not sure that an honest accountant would be able to do what you are suggesting, and if they did I'm not sure an honest solicitor would encourage you to pursue this! Unless I've misunderstood what you're saying, it sounds rather close to tax evasion.

If the estate is valued just below the IHT threshold, I expect it's more likely that your figures would be checked.

RabbitMad

Savvy_Sue wrote: »

I am not sure that an honest accountant would be able to do what you are suggesting, and if they did I'm not sure an honest solicitor would encourage you to pursue this! Unless I've misunderstood what you're saying, it sounds rather close to tax evasion.

If the estate is valued just below the IHT threshold, I expect it's more likely that your figures would be checked.

You've misunderstood.

The assets are
1. A property
2. The capital outstanding on a commercial loan
3. A debt owed by a person HMRC are trying to bankrupt
4. Cash in the bank

The various liabilities reduce the value of the assets to give the NAV.

However I would like the company to be valued as follows:
1. Property - 100% of CGT embedded within the company (however I'm told 50% max is the most HMRC will agree)
2. Discount the loan by a risk factor (tbc) as the loan is at a lowish fixed interest rate over 15 years and the loan was 100% ltv
3. Discount the county court debt by 90% as I doubt we'll see more than that
4. Count the cash as it is.

I've chatted this through with 2 tax specialist / people that can value companies along with a person at the share valuation bit of HMRC and what I'm suggesting in theory is fine.

As its a small company the tax specialists don't want the work as their charge would not cover all the additional paper work (know you client stuff etc) that they can't charge for but I now feel confidant that I can do this myself. I just need my solicitors opinion on going it alone.

Alternatively I could ask HMRC's SV people to agree the value before probate

And unfortunately its well above the IHT threshold. (infact if it was below the IHT threshold I'd be putting as high a value as I thought I could get away with to reduce any CGT liability in the future)

Savvy_Sue

You are now going way over my head, so as long as you are taking legal advice ...

I hope you can see why I misunderstood: Dad's affairs were very very simple, so as long as we had some basis for the figures we were using it didn't matter.

RabbitMad

I'm getting my head around it. Probate valuations are all about what the open market value of something is and getting this either as low or as high as possible (depending upon where the IHT threshold is in relation to the estate).

So for the house I've paid a chartered surveyor who has come in at £25K less than the estate agent I'd asked and backed his reasoning up with actual sale prices achieved etc.
For the contents I paid a valuer who has valued the contents at next to nothing.
So for the company I want the value the hypothetical buyer will pay and given the assets of the company only an idiot would pay the net asset value given the risks of the debt / loan going bad.

I'll update this thread once probate has gone through and let you know how I get on.

Lets hope its not from my prison cell ;-)

monkeyspanner

RabbitMad wrote: »

You've misunderstood.

The assets are
1. A property
2. The capital outstanding on a commercial loan
3. A debt owed by a person HMRC are trying to bankrupt
4. Cash in the bank

The various liabilities reduce the value of the assets to give the NAV.

However I would like the company to be valued as follows:
1. Property - 100% of CGT embedded within the company (however I'm told 50% max is the most HMRC will agree)
2. Discount the loan by a risk factor (tbc) as the loan is at a lowish fixed interest rate over 15 years and the loan was 100% ltv
3. Discount the county court debt by 90% as I doubt we'll see more than that
4. Count the cash as it is.

I've chatted this through with 2 tax specialist / people that can value companies along with a person at the share valuation bit of HMRC and what I'm suggesting in theory is fine.

As its a small company the tax specialists don't want the work as their charge would not cover all the additional paper work (know you client stuff etc) that they can't charge for but I now feel confidant that I can do this myself. I just need my solicitors opinion on going it alone.

Alternatively I could ask HMRC's SV people to agree the value before probate

And unfortunately its well above the IHT threshold. (infact if it was below the IHT threshold I'd be putting as high a value as I thought I could get away with to reduce any CGT liability in the future)

You seem to have a pretty good handle on the detail. I would have thought the approach you are taking is reasonable and if it was me would attempt to negotiate a deal with the revenue. If you cannot agree terms you may find that the revenue react more favourably to an accountant getting involved.

As long as you are open with the facts there is no reason why you should have legal difficulties. Private companies are notoriously difficult to sell and in the past I have agreed a much depressed value against balance sheet value on a company for CGT purposes with the revenue. After all it is only worth what the buyer is willing to pay and if the owner is no longer alive it is difficult to see how the revenue could argue for a value on intangibles such as goodwill.