Stand-out Q – valuing listed shares…

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WED, 29 MAR 2017

Our Technical Hub provides access to a wide range of pension tax and trust technical resources. Every now and then we post tweets covering stand out questions from our technical content and our answers in case others might also find them helpful. As Twitter’s character restrictions only allow for the bare bones of the Q&A we link to the details here, too.

Question:

How does a client value listed shares for income tax and CGT?

Answer:

HMRC introduced The Market Value of Shares, Securities and Strips Regulations 2015 to take effect from 6 April 2015. The Regulations change the way that listed shares are valued for income tax and capital gains tax purposes, from this date.

The new valuation method uses the average of the bid and closing prices on the day. Where the markets are not open on the relevant day, the values for the last day that the markets were open will be used.

Example
Giles owns 1,000 shares in ABC Plc, a listed share. He gifts the shares on 10 April 2015. The bid and closing prices are £1.10 and £1.16 respectively. The shares are valued as follows:-

£1.10 + ½ (£1.16-£1.10) = £1.10 + 3p = £1.13
1,000 x £1.13 = £1,130.

This contrasts with the alternative “quarter up” valuation calculation, which can still be used for calculating the value of listed shares for inheritance tax purposes.

The result is that, in some circumstances, the CGT and IHT valuations may not align.

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