HM Revenue & Customs & EMI Valuations
At RM2 we have occasionally had cause to wonder whether HM Revenue & Customs (“HMRC”) actually read the Enterprise Management Incentive valuation submissions that we make on behalf of clients.
We are, of course, aware that HMRC view Enterprise Management Incentive
(“EMI”) valuations as low risk (and this has been their stated view for a
while). In addition, since they have
received many many valuations from our office over the last eighteen years or
so, we do perhaps in their eyes require a “lighter touch”.
However, during the last month or so, we’ve heard from a couple of
companies that carried out their own valuation submissions.
It transpires that HMRC take more of an interest in these matters
than we thought. Both DIY valuations
One explanation for this is that the government (in fact HM
Treasury in reality) are now starting to view the tax relief obtained in
relation to EMI options as expensive and have tasked HMRC with examining
valuation requests with more of a fine-tooth comb.
However, the explanation that we at RM2 prefer is that a DIY
application was not the way forward. As
all tax professionals know, HMRC must be spoon-fed and everything must be made
very easy for them to help you (by providing the right result/number). If the requisite level of care is not taken,
HMRC may be less obliging, potentially resulting in the loss of a considerable
amount of tax relief for the submitting company.
RM2 have also seen EMI valuations being rejected where there was
an “offer to buy” the company lurking in the background.
This is like “Kryptonite” to any value that a company may have
been hoping to agree. HMRC (like sharks)
will smell “blood in the water” and if very careful consideration is not given
justifying why the value is in fact lower (and it can be argued thus) than the
price being offered (by the offeror) then once again potentially a considerable
amount of tax relief will effectively be lost.
DIY valuation – is it really worth it as against a relatively
inexpensive valuation when potentially a considerable amount of tax relief may
be at stake?
For more information on any of the content covered in this article or if you need our assistance with a valuation, please contact a member of the RM2 team on 020 8949 5522 or email email@example.com.