With ever demanding clients and tight deadlines, there is pressure on business advisers to not only deliver a professional grade valuation, but also ensure that they are accurate, defensible, and aligned with market realities.
Why share valuations are more important than ever
Several key trends are driving the increasing need for robust share valuations:
Increased interest and adoption of share valuation schemes
Now there is a growing expectation that most accountancy firms involved in advisory work should be in a position to handle such mandates from existing and potential new clients. Nobody likes to turn away business – if, of course, it can be sensibly handled in-house.
Succession and estate planning
Family businesses need precise valuations for ownership transitions and tax planning.
Regulatory and tax compliance
Stricter reporting standards require transparent, fair-value assessments of shares.
Advances in valuation technology
Improved financial modelling and market data make valuations more accurate and efficient.
The share valuation process: a step-by-step approach
A structured process is essential for achieving accurate and defensible valuations. The key steps include:
- Defining the purpose
- Gathering financial data
- Choosing the valuation methodology
- Applying discounts and premiums
- Validating and reporting findings
Common pitfalls in share valuations
Valuation errors can lead to costly miscalculations. Key pitfalls to avoid include:
- Incorrect debt and cash assumptions
- Inconsistent discounting
- Misjudging market comparators
- Double counting growth factors
- Overlooking business-specific risks
HMRC dos and don’ts
Understanding how HMRC assesses share valuations is crucial for ensuring compliance and defensibility. Here are some key dos and don’ts:
HMRC dos:
- Justify assumptions by clearly explaining valuation methodologies.
- Use market data to support conclusions with reliable benchmarks.
- Explain adjustments with well-reasoned justifications for discounts and premiums.
- Ensure clarity by presenting findings in a structured, professional, and concise manner.
- Consider alternative approaches to strengthen credibility.
HMRC don’ts:
- Don’t make unsupported assumptions – base valuations on evidence, not speculation.
- Don’t ignore other approaches, as dismissing alternative methods weakens credibility.
- Don’t overlook HMRC scrutiny – anticipate challenges and justify key decisions.
- Don’t omit key data – include all relevant financial and business information.
- Don’t assume automatic approval – be prepared to defend your valuation thoroughly.
Recognising and addressing these issues strengthens the reliability of valuation conclusions.
Next steps: watch the webinar or book a demo
Best practice – alongside relevant, robust data you can rely on and leading edge technology – is core in making your life easier and more convenient. Why not take the next step and speak to Greg (the webinar’s co-presenter) for an informal chat?
Find out whether Valutico’s software is right for you:
- Email Greg Brown or call him at 07595719522.
- Book your demo to explore our industry-leading valuation software.
If you didn’t get a chance to attend the webinar, register to watch it on demand for a deep dive into share valuations and best practices.
