At a Glance
- Instruction type: Probate valuation for UK Inheritance Tax purposes under s.160 IHTA 1984
- Subject interest: 22% shareholding in an offshore investment holding company (in voluntary liquidation) whose primary asset was a quoted stake in a listed Asian specialty chemicals manufacturer
- Valuation conclusion: USD 198.7 million (approximately GBP 148.4 million equivalent)
- Turnaround: Full report delivered within one week of initial instruction
Background and Instruction
A UK-based chartered accountancy practice was acting as adviser to the executors of a deceased estate. The deceased, a dual national with assets in multiple jurisdictions, had held a 22% ordinary shareholding in an offshore investment holding company incorporated in a Crown Dependency jurisdiction. The company was in the process of voluntary liquidation as part of a family settlement at the date of death.
The company’s primary asset was a 28% equity stake, comprising approximately 67 million shares, in a publicly listed specialty chemicals manufacturer quoted on two Asian stock exchanges, with a market capitalisation of approximately USD 3.8 billion at the valuation date.
The accountancy practice required an independent valuation of the deceased’s interest for inclusion in a UK Inheritance Tax return under section 160 of the Inheritance Tax Act 1984. Given the probate timetable, an efficient turnaround was essential. bizval was instructed and delivered a fully documented comprehensive valuation report within one week of receiving the instruction.
Valuation complexity
This was not a standard UK business valuation. The instruction involved several layers of technical complexity that most valuation firms would find difficult to navigate:
- A multi-jurisdictional ownership structure. The subject interest was a shareholding in an offshore holding company incorporated in a Crown Dependency, whose primary asset was a quoted equity stake in an Asian listed company. The valuation required an understanding of company law and liquidation mechanics in two separate offshore jurisdictions.
- A quoted underlying asset in a foreign currency. The shares of the underlying listed company were quoted on the relevant Asian exchanges in the local currency of the listing jurisdiction. Translating the quoted price through to a sterling equivalent for IHT purposes required careful application of exchange rates sourced from the Bank of England at the precise date of death.
- Local capital gains tax at the holding company level. Any realisation of the underlying quoted shares by the holding company would trigger capital gains tax in the listing jurisdiction at the holding company level. This tax liability, estimated at an effective rate of approximately 15%, had to be deducted in arriving at the net realisable value of the holding company’s assets. The precise rate required analysis of the relevant local tax legislation and was subject to formal confirmation by specialist tax counsel in the listing jurisdiction.
- A liquidation context requiring discount analysis. Although the company was in voluntary liquidation, the question of whether a minority discount or a discount for lack of marketability should be applied required careful analysis. bizval’s conclusion required explicit justification and documentation.
- Accounts that predated the valuation date. This required working with the company accountant and controller to validate and reference movements that took place in the interim period.
bizval’s Approach
bizval adopted a Net Asset Value methodology as the primary approach that reflected the economic reality of the subject interest. The subject holding company had no trading operations of its own and its value derived entirely from its underlying assets. With the company in voluntary liquidation, the shareholder’s entitlement was a pro-rata share of net distributable assets rather than a going-concern interest in an operating business. A DCF or earnings multiples approach would have been methodologically inappropriate and indefensible.
The report was structured to meet the specific requirements of HMRC’s Shares and Assets Valuation team, explicitly citing the statutory basis under section 160 of the Inheritance Tax Act 1984, documenting all assumptions and their sources, and addressing the discount analysis with a clear evidenced conclusion. All market data, exchange rates and tax rates were sourced from verifiable public sources and cited in full.
bizval liaised directly with the instructing accountant throughout the engagement to confirm the balance sheet position of the holding company and to flag the outstanding qualifications, specifically the need for updated management accounts and formal local tax advice from specialist counsel in the listing jurisdiction, in advance of submission to HMRC.
The Outcome
A fully documented, comprehensive, independent valuation report was delivered within one week of instruction. The report established an opinion of value of USD 198.7 million (approximately GBP 148.4 million) for inclusion in the UK Inheritance Tax return, with a nil discount for lack of marketability clearly justified and evidenced. The report included a sensitivity analysis showing the impact of the underlying listed company’s share price movements on the valuation conclusion, and set out the outstanding qualifications required to be resolved before HMRC submission.
What this Demonstrates about bizval
Global capability
bizval’s network partners is centred on the UK, USA and EMEA. Our valuation capability is global. We regularly carry out instructions involving companies, assets and shareholdings across multiple jurisdictions and our team has the technical expertise to navigate complex cross-border structures wherever the underlying assets are located. The jurisdiction of the business being valued does not limit what we can do.
Efficiency without compromise
This instruction was completed in its entirety within one week of the initial request from the accountant. That turnaround included reviewing the company’s financial statements, sourcing market data across multiple exchanges and currencies, analysing the applicable local tax legislation, conducting the discount analysis, and producing a fully documented report to HMRC standard. Efficiency and rigour are not a trade-off at bizval.
HMRC-standard documentation
Every assumption was stated and justified. Every source was cited. The discount analysis was explicit and evidenced rather than simply assumed. The outstanding qualifications were clearly flagged so that the instructing accountant knew precisely what needed to be resolved before HMRC submission. That is the standard every bizval report is prepared to, regardless of complexity.