Share valuation

[nathan123]

An individual is a non-resident and non-domicile. His only UK assets is UK company shares- the company, in turn, own two properties offshore.

On the share valuation, HMRC has taken the property value as the value of the shares.

Our questions are

• The initial purchase contribution provided by the deceased ( assumed a shareholder loan to the company) can be deducted against the market value of the shares as a liability?
• If so, the shareholder's loan balance of the deceased is UK assets for IHT purpose?
• There is no formal loan agreement in place, can we do one with today's date?

Thanks for your help in advance

[iwmtaxadvisor]

Every situation with IHT and close companies and residency is complex and there are no straightforward paths through. In your case I would ask whether the advice of a specialist is a compliance requirement.

I believe you are asking about the value for IHT purposes of a UK resident company which owns some property assets, and you have said that HMRC valuations has accepted a value of the shares as 100% of the market value of the properties. That would imply you have already taken into account the liabilities of the company as Nil, and would also imply no discount for minority holdings so one assumes it is actually 100% of the shares issued by the company you are obtaining a value for.

> • The initial purchase contribution provided by the deceased (assumed a shareholder loan to the company) can be deducted against the market value of the shares as a liability?
The company's liability to repay would normally be a deduction against the value of the company shares for IHT, except for the anti avoidance provisions (and one would need more detail as to loan owner). The use of the word 'assumed' is troubling.

>• If so, the shareholder's loan balance of the deceased is UK assets for IHT purpose?
Yes that would tend to follow but one needs the detail of who is the owner of the loan and where resident and if they have died. If this person is the same as the previous owner of the shares (now deceased), then you are valuing a separate asset (although for valuation purposes there is an interaction by virtue of any associates).

• There is no formal loan agreement in place, can we do one with today's date?
You can always attempt to formalise an existing loan agreement which is oral but you would need good evidence if you expect HMRC to pay attention to it: I imagine this would need debate if you are trying to figure the rate of interest agreed on the loan: and if the company was close and subject to the transfer of value' considerations that would arise, and the relevant DTT.