Valuation of assets and shares – is now a prime opportunity?

  • 7th May 2020

Many business owners look at options of developing employee share programmes, gifting to the next generation or transferring assets into corporate ownership, however these transactions can often lead to tax charges which can in turn lead to the transaction becoming unfeasible due to the size of the potential tax liability.

The Coronavirus pandemic however has potentially created the perfect environment for business owners to consider the opportunities for possible changes again.

Under normal circumstances, and depending on the value of assets involved, the tax charges attached to these sort of schemes can incur a significant cost to the parties involved.

A key factor in determining whether a tax charge arises is the market value of the asset. In employee share programmes, shares at less than market value are treated as the employee receiving employment income. In gifting assets to a relative or person connected to the business, this would be treated as selling the asset at market value even if no consideration is received.

In both these instances, there would be a tax charge. It could be that no cash is received by the individual meaning the tax charge could make the transaction not viable.

For tax purposes however, the market value is determined by taking into consideration the market conditions and the information available at the time of valuation.

With the recent impact on the global financial markets, the value of many assets could currently be depressed. This could mean that a transaction that was previously not feasible, now makes a lot more sense.

If a business’s trade has been impacted by the Coronavirus outbreak now could be the opportune moment to establish the market value for shares that could be part of an employee share programme.

Time is of the essence however as significant evidence of market recovery will mark the end to any potential benefits.

If you would like to discuss any information detailed within this article or any other wealth management or investment opportunities, please do speak to our independent financial advisers for a free initial consultation.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change, and their value depends on your individual circumstances. Tax rules are complicated so you should always obtain professional advice.

This document is for information only and should not be construed as advice or an offer, invitation or solicitation to enter into any financial obligation, activity or promotion of any kind. Please talk to your Financial Adviser as to the suitability of any investment.

All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.