Share Valuations for Employee Shareholder Status

If you're granting employee shareholder status to someone in your company, you need to award them at least £2,000 worth of shares. To ensure both you and your employee have certainty about the share value, you can ask HMRC's Shares and Assets Valuations (SAV) team to agree the...

What is employee shareholder status?

Employee shareholder status is an arrangement where employees receive shares in exchange for giving up certain employment rights. To qualify for this status, you must award shares worth at least £2,000 to the employee. Getting an agreed valuation from HMRC helps avoid disputes about whether the £2,000 threshold has been met and provides tax certainty for both parties.

How to request a valuation

To get an employee shareholder valuation from HMRC, you need to complete a VAL232 form. This form asks for detailed information about your company and the shares being awarded.

The SAV team will review your submission and may ask additional questions based on your answers. They will only request information they consider relevant to the valuation.

If you have extra information not covered by the form that could help with the valuation, you can include it on a separate sheet. This might include:

Special features of your business
Relevant financial affairs of the company, directors, or shareholders

Once you've completed the form, you'll need to print it and post it to the SAV team.

How long the valuation remains valid

An agreed employee shareholder valuation is valid for 60 days. You must award the shares during this 60-day period for the agreed valuation to apply.

If you've already awarded the shares before receiving the valuation, the agreed value will apply only to the specific date when the shares were awarded.

Extending the validity period

After 60 days, you can apply to extend the valuation period by writing to SAV. However, this is only possible if there have been no significant events since the original valuation.

Significant events that would prevent an extension include:

Any change (completed or actively planned) in the share or loan capital of the company
Any arm's length transaction (completed or actively planned) involving company shares
Negotiations or preparations for a flotation or takeover
Declaration of a dividend on any class of shares
Publication of new financial information, such as annual accounts, interim results, or announcements

If any significant events have occurred, you must start the valuation process again from the beginning.

What to expect from the valuation process

If you appoint an accountant or professional valuation firm to handle the application, SAV will deal directly with them. You remain responsible for ensuring your professional adviser has all the facts and for the accuracy of the information provided to SAV.

Once SAV has all the information they need, they aim to reach an agreed valuation within 4 weeks of receiving your request. If they need to ask for more information, the process will take longer.

SAV will explain any actions they take, including:

Why they would like to meet with you
Why they need to question any explanation you've given
Why they propose a valuation different from yours

If you or your professional adviser wants to meet to discuss the valuation, SAV will try to arrange a meeting, though this may extend the timeframe beyond the usual 4 weeks.

When you or your adviser writes to SAV with a question or issue, they aim to respond within 10 working days. If they cannot meet this timeframe, they will explain the reason for the delay and when you can expect a full response.

Confidentiality

Your company, its directors, and shareholders have the same right to confidentiality as all taxpayers. SAV will only share information with people you have authorised, except in limited circumstances allowed by law (such as proceedings at a tax tribunal).

If you disagree with the valuation

If you believe SAV has made a mistake or treated you unfairly, you can ask for the matter to be reviewed by the Assistant Director in charge of the relevant part of SAV where the valuation was carried out.

If you're still not satisfied with the outcome after the review, you can follow HMRC's formal complaints procedure.

Key points to remember

You must award at least £2,000 worth of shares for employee shareholder status
Use form VAL232 to request an agreed valuation from HMRC
Agreed valuations are valid for 60 days
SAV aims to complete valuations within 4 weeks of receiving all necessary information
Extensions beyond 60 days are only possible if no significant events have occurred
You can appoint a professional adviser to handle the valuation process on your behalf

Sources

Share and Assets Valuations for employee shareholder status

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.