HMRC Business and Share Valuations: EMI, Probate, EIS and SEIS
By Bill Anderson, FCCA, Chief Executive Officer, Assetica — 2026-05-08
Direct Answer: An HMRC valuation is a separate discipline from a deal valuation. It values a defined shareholding on a fixed date, on a basis the legislation specifies, using a hypothetical willing buyer and seller rather than a real one. It arises for EMI options, probate and inheritance tax, EIS and SEIS advance assurance, gifts and transfers between connected parties, and reorganisations. Minority holdings carry discounts, and the workings have to be documented.
Most valuations exist because two parties are negotiating. An HMRC valuation exists because a statute requires a number on a particular day, for a particular block of shares, on a particular basis. Nobody is bargaining. There is no buyer to persuade. What there is instead is a specialist team at HMRC who can ask to see how you arrived at the figure, and a set of consequences if the workings do not stand up.
This guide explains what makes tax valuations different, what an agreed valuation actually is, and how the four situations British owners meet most often work: EMI options, probate and inheritance tax, EIS and SEIS, and minority holdings. Every rule below is something to confirm on gov.uk or with your own tax adviser, because thresholds, time limits and conditions change and the version that applies is the one current on your valuation date.
Why an HMRC valuation is a different discipline
A deal valuation answers the question "what would someone pay for this business". A tax valuation answers a narrower and stranger question: what price would a hypothetical willing buyer and a hypothetical willing seller, neither under compulsion, agree for this specific parcel of shares on this specific date, given the information they would be entitled to see.
That framing changes the work in four ways:
- The date is fixed and cannot move. A date of death, a grant date, a transfer date. Later events are generally not evidence of value on that date, and hindsight is not admissible reasoning.
- The subject is the holding, not the company. A tax valuation values a stated number of shares of a stated class, with the rights those shares actually carry.
- The basis of value is prescribed. The legislation dictates it. Substituting the basis you would use for a sale is one of the most common reasons a figure fails.
- The audience is an expert, not a counterparty. HMRC's Shares and Assets Valuation team handles these figures, and its published guidance on shares and assets valuations for tax sets out what it does and how to contact it.
The practical consequence is that a valuation prepared for a buyer will not usually do for HMRC, and a valuation prepared for HMRC will usually understate what a strategic buyer would pay. The two are answering different questions. Our guide to valuation standards and bases of value explains why choosing the wrong basis quietly changes the answer.
What an agreed valuation actually is
An agreed valuation is one that HMRC has looked at before the event and accepted, rather than one it reviews afterwards during an enquiry. The difference is certainty. With an agreement in hand you know the tax consequence of what you are about to do. Without one, you are taking a position and hoping it holds.
Agreement is available for some situations and not others, and the process differs in each. It is not a rubber stamp: HMRC will ask for the reasoning, the comparables and the basis, and it can come back with a different figure. That is the point. A figure that survives the conversation is worth considerably more than a figure that was never tested.
| Situation | What is being valued | Where to confirm the rules |
|---|---|---|
| EMI share options | Actual market value and unrestricted market value of the option shares, before grant | gov.uk guidance on tax and employee share schemes |
| Probate and inheritance tax | The deceased's holding at open market value on the date of death | gov.uk guidance on valuing an estate |
| EIS and SEIS | The company and the shares being issued, supporting the round and the advance assurance application | gov.uk venture capital schemes guidance |
| Gifts and connected-party transfers | The transferred holding at market value, irrespective of what was actually paid | gov.uk shares and assets valuation guidance |
EMI share valuations and why the agreement comes first
Enterprise Management Incentives are the route most UK companies use to give employees equity, and the tax treatment is the whole reason the scheme is attractive. That treatment depends on the shares being valued properly and the options being granted at the right price.
An EMI valuation establishes two figures, and the distinction matters:
- Unrestricted market value (UMV). What the shares would be worth ignoring the restrictions attached to them, such as compulsory transfer provisions or limits on transferability in the articles.
- Actual market value (AMV). What they are worth taking those restrictions into account. AMV is the figure usually used to set the exercise price.
Because option holders receive a small, non-controlling and usually restricted interest, both figures normally sit well below a headline equity valuation from a funding round. Founders are regularly surprised by this. A company that raised at a given pre-money figure does not automatically carry that number across to the shares a junior employee is being offered, because the employee is not receiving the rights an investor negotiated.
The sequence is the part to get right. The valuation is prepared and submitted to HMRC for agreement, and the options are granted afterwards, within whatever period the agreement remains valid. That period is set out in HMRC's current guidance, so check it on the gov.uk page on EMI and employee share schemes rather than relying on a figure quoted elsewhere, and grant inside it. Granting first and valuing afterwards inverts the process and puts the tax advantages the scheme exists to deliver at risk for the employees, not just for the company.
Companies running equity schemes in the UAE rather than the UK face a different set of mechanics, which we cover in employee share scheme valuation in the UAE.
Share valuations for probate and inheritance tax
When an estate includes shares in a private company, those shares have to be valued at open market value on the date of death. There is no market price to look up and no transaction to point at, so the figure has to be constructed, and it has to be constructed on the facts as they stood on that day.
Three things make this harder than it looks. The valuation date cannot be moved to a more convenient set of accounts, so management figures and the position at the time have to be reconstructed. The holding is usually a minority, because family companies rarely leave a single controlling block. And the company's articles may restrict who the shares can pass to, which affects what a hypothetical buyer could actually acquire.
Executors carry personal responsibility for the figures in the return, which is the reason to have the valuation prepared independently rather than estimated. Book value is not open market value and will not be accepted as a substitute. HMRC sets out how to value an estate and report it in its guidance on valuing the estate of someone who has died, and the reporting requirements and time limits there are the ones to work to.
The same valuation frequently has to serve more than one purpose, because a death in a family company often triggers a succession question at the same time. Our guide to valuation for estates, inheritance and divorce covers where those purposes overlap and where they do not.
EIS and SEIS valuations for early-stage companies
SEIS and EIS give investors tax reliefs that make early-stage investment viable, and the reliefs depend on the company, the shares and the money raised all meeting conditions set out in the legislation. Those conditions, including company age, size, trade and how the money is used, are the ones to confirm on gov.uk, because they are specific and they change.
Valuation enters in two places. First, a company can apply for advance assurance that a proposed share issue is likely to qualify, and the application is stronger when it is supported by a coherent view of the business and the shares being issued. HMRC explains the process on its advance assurance guidance for venture capital schemes. Second, the pre-money valuation sets how much of the company the round costs, and a number picked to suit the raise rather than built from evidence is the first thing a sophisticated investor tests.
Valuing a company with little or no revenue is genuinely difficult, and honest methods acknowledge that. Early-stage work combines a discounted cash flow on forecast cash flows, scorecard and similar structured qualitative methods, and comparable evidence from recent rounds in the same sector and stage. None of them is precise. Running several and explaining the spread is more defensible than presenting one figure with false confidence. Our guides to startup valuation for fundraising and the valuation methods themselves work through the mechanics.
Minority holdings, control and the discounts that follow
Almost every tax valuation is a valuation of a minority holding, and this is where most of the difference between a headline company value and a tax figure comes from.
A minority shareholder cannot declare a dividend, appoint or remove directors, change the articles or force a sale. They hold an interest that produces income only if somebody else decides it should, and that cannot readily be sold because there is no market for shares in a private company. Two adjustments follow:
- A discount for lack of control. Reflecting that the holder cannot direct the company's cash or its strategy. Its size depends on the actual rights: a stake that carries a blocking right is worth more than one that carries none.
- A discount for lack of marketability. Reflecting that there is no ready buyer, and that the articles may require the shares to be offered internally first at a price the articles set.
Both have to be evidenced, not asserted. Applying a round-number discount because it is conventional is exactly the kind of reasoning that does not survive examination, and omitting a discount that clearly applies is no safer. The analysis starts with the articles of association and any shareholders' agreement, because those documents define what the holding actually is. We set out how the discounts are built and supported in the guide to valuation discounts.
What documentation HMRC expects
A report that survives examination is one that shows its working. In practice that means the file contains:
- A stated valuation date and basis of value, with the legislative purpose identified.
- A description of the exact holding: number of shares, class, and the rights attached under the articles and any shareholders' agreement.
- Statutory and management accounts covering the period up to the valuation date, with the management figures reconciled to the last filed accounts.
- Normalisation workings, showing each adjustment to earnings and the evidence for it, adjusted in both directions.
- Methodology and comparables, with the source of each multiple or input identified rather than summarised.
- The discount analysis, tied to the rights the shares actually carry.
- A statement of independence from the party who benefits from the answer.
Our documents checklist and the downloadable valuation readiness checklist list what to assemble before the work starts. Gathering it first is what keeps a report to 5 to 7 business days rather than several weeks of correspondence.
Where tax valuations go wrong
The failures repeat, and they are avoidable:
| The mistake | What it costs |
|---|---|
| Using a funding round price as the EMI share value | Overstates the option shares, because investors negotiated rights employees do not receive |
| Granting options before the valuation is agreed | Puts the scheme's tax treatment at risk for the employees as well as the company |
| Treating a minority stake as its share of the whole | Ignores control and marketability, and invites challenge in both directions |
| Using book value for probate | Not open market value, and exposes executors personally |
| Working back from a figure that was decided first | Fails precisely when it is examined, which is the only time it matters |
If a valuation has already been produced and you doubt it, the position is recoverable. A review re-performs the reasoning rather than simply proposing a rival number, which is the approach set out in getting a second opinion on a valuation.
Getting an HMRC valuation prepared
Start from the event and its date, not from the number. Identify which tax event applies, fix the valuation date, confirm the current rules and time limits on gov.uk or with your tax adviser, then commission the valuation with enough time to submit it and wait for a response before the transaction has to happen. Working backwards from a deadline is how good figures end up rushed.
Assetica prepares independent share and business valuations to International Valuation Standards and the RICS Red Book. We do not audit and do not broker deals, so we have no stake in whether the figure is high or low, which is the quality that makes a report useful to HMRC. Standard reports take 5 to 7 business days from complete documents, 2 to 3 expedited. If you want an indicative figure first, the business valuation calculator gives you a range to work from, and the wider picture on UK company valuation is in our guide to business valuation in the UK.
Facing an EMI grant, a probate valuation or an EIS round?
A short scoping call confirms the tax event, the valuation date, who has to accept the figure and what documents exist, and ends with a fixed fee in writing. See our tax valuation service and our page for UK company owners.
Book a scoping call →This article is general information on UK tax valuations. It is not tax or legal advice, and it deliberately quotes no rates, thresholds or time limits. UK rules change, and the version that applies is the one current on your valuation date, so confirm the position on gov.uk and with your own UK tax adviser before acting.
Frequently Asked Questions
When does HMRC require a business or share valuation?
Most commonly for EMI and other share option grants, probate and inheritance tax, EIS and SEIS share issues, gifts and transfers of shares between connected parties, company reorganisations, and employment-related securities. Each needs market value for a defined holding on a specific date, on the basis the relevant legislation prescribes rather than a negotiated price.
Can a valuation be agreed with HMRC before the transaction?
For some events, yes. EMI option valuations in particular are prepared and submitted for agreement before options are granted, which gives certainty about the tax treatment. HMRC will test the reasoning and may propose a different figure. Check the current process and any validity period on gov.uk before you rely on a timetable.
Why is my EMI share value lower than the price we raised at?
Because option holders receive a small, non-controlling and usually restricted interest, while investors negotiated rights an employee does not get. Discounts for lack of control and lack of marketability apply, and restrictions in the articles reduce actual market value below unrestricted market value. A funding round price is not a substitute for an EMI valuation.
How are private company shares valued for probate?
At open market value on the date of death, based on a full valuation of the company and of the specific holding, with discounts reflecting the rights those shares carry. Book value is not acceptable. Executors carry personal responsibility for the figure reported, which is why an independent valuation is worth having.
Do SEIS and EIS rounds need a formal valuation?
A formal valuation is not itself the qualifying condition; the scheme conditions concern the company, the shares and the use of funds, and should be confirmed on gov.uk. A defensible pre-money valuation nonetheless supports an advance assurance application and gives investors confidence that the price was built from evidence rather than chosen to suit the raise.
Is a minority shareholding worth its percentage of the company?
Usually not. A minority holder cannot control dividends, appoint directors, change the articles or force a sale, and there is no ready market for the shares. Discounts for lack of control and lack of marketability apply, sized from the actual rights in the articles and any shareholders’ agreement rather than from convention.
Speak to Assetica about Business Valuation
Assetica is an independent business valuation firm in Dubai. We do not audit and we do not broker deals, so the number carries no conflict. Read more about business valuation, or book a scoping call. Standard reports are issued in five to seven business days.