HMRC has recently published a draft Statutory Instrument, designed to simplify the manner in which the market value of shares in listed companies (and similar instruments) is to be determined for tax purposes. This follows on from a recommendation from the Office of Tax Simplification in its final report on unapproved share schemes. The Instrument is issued for consultation at this stage.

Currently, the market value of listed shares is determined using a calculation specified by the legislation. For shares, this is usually the 'quarter up' method, where market value is taken to be the value of the lowest bargain made during the day, plus one quarter of the difference between that value and the value of the highest bargain in that day.

The proposal in the consultation is that market values will be determined as follows:

  • listed shares – the closing price on the relevant day;
  • strips – the mid-point between the closing 'buy' and 'sell' prices known as the 'mid- price'; and
  • employment related securities sold on the same day of acquisition – the value under a bargain at arm's length on the same day as they are acquired, such that the value used for income tax when acquired and the capital gains tax value on sale are the same.

This is a welcome step and determining market value should be easier under the new provisions; the values accord with readily available market data from resources such as websites and newspapers.

If you want to read the draft instrument, please go to:

www.hmrc.gov.uk/drafts/market-value-shares.pdf

There is an explanatory note at:

www.hmrc.gov.uk/drafts/market-value-sharesem.pdf

If you have any comments on the proposal, you can write directly to HMRC at the address (by 22 August 2014) in the explanatory note or send them to us.

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