As most British business valuators know, HMRC Shares and Assets Valuation (SAV) reviews (and sometimes questions) fiscal valuations. Staff at SAV have shrunk by about half over the years, but they still deal with many valuations (approximately 12,500 a year). The result for those preparing valuations for the Revenue? ‘This is all about risk assessment and you’re actually on the front foot, if you like,’ says Jenny Nelder (Bruce Sutherland & Co.).

‘What they need from valuators is something they can tic quite easily,’ she says. In fact, Barry Roland (HRMC) confirms the fact that HRMC is looking for speed and clarity, particularly in areas where they’ve been slow to settle filings in the past. He confirms their internal goal is to settle 80% of the valuations they receive within 15 days, and 90% within 40 days of receipt.

Nelder advises business valuers to ‘stick to multiples only’ when submitting fiscal valuations. Of course, there are exceptions, but her experience indicates that earnings forecasts and discounted cash flows can ‘cause the man at the Revenue to go blank. One said to me, “Do you think we could talk multiples?”,’ she told the ICAEW Spring BV Conference group last month.

Nelder notes a relatively rare—but problematic—price-versus-value challenge for fiscal valuations. It starts if clients have tried to sell the business or raise rounds of financing. ‘They’re going to come out with a price, not a value, which is the result of a negotiation designed to not dilute the existing shareholders and provide sufficient funds,’ Nelder explains. Buyers, either control or minority, understand the history and ‘why previous rounds of financing are at prices needed for fundraising, and not value.’

Nelder says she’s ‘hearing that there has been pushback from the Revenue that private funding values should stand, but I disagree. Those are pricings, and I slap a discount on them of 70% or more.’