SVM109020 - ITEPA: General Procedural Points

The Inspector’s Responsibility

Where directors or employees acquire unlisted securities by reason of an employment, the Inspector may wish to check the values put forward in the SA return or by the employer.

When asking Shares and Assets Valuation (SAV) to check a valuation, the Employment Related Securities Manual (ERSM) at ERSM220080 states that the Inspector should indicate what elections have been made to disregard restrictions.

The Inspector is also required to:

• State the basis of the charge to tax and indicate the relevant charging section
• Supply a copy of the latest statutory accounts available on file relevant to the transaction
• Specify the holding of securities to be valued
• Specify the rights attaching to the securities and whether the restrictions are to be ignored or not
• Forward any valuation submitted by the taxpayer / company

However, where the Inspector is not in a position to make a submission on the basis of the ERSM Instructions, valuers should be as helpful as possible by reference to the limited information supplied by the Inspector and from our own sources.

Pre – Transaction Rulings

In accordance with Code of Practice 10 and the guidance on the Varney proposals, valuation issues are specifically excluded from pre - transaction rulings.

However, very exceptionally, we may at our discretion, entertain a request for a pre - transaction valuation check when a substantial number of employees is involved. The transaction needs to be transparent, without any complicating tax or valuation issues. You should not get involved in any contention or debate with such valuations. The Team Leader should agree that SAV will consider the request.

Post Transaction Valuation Checks (PTVC)

Where an income tax charge in respect of employment related securities has arisen, an application can be made to the relevant HMRC office for a PTVC. The local Inspector will instruct us accordingly. There are no formal procedures in place for income tax PTVCs and so the procedures for CGT PTVCs should be followed as appropriate.

Where a request is received, the parties should be asked to confirm, if such is the case, ‘that the valuation does not relate to a transaction which is part of an arrangement disclosable under the Disclosure of Tax Avoidance Schemes legislation. If it is, what is the number of the scheme as notified by the HMRC?’

Any case that involves a disclosable scheme should be referred for advice.

HMRC is not obliged to undertake an employment income PTVC and may in its absolute discretion, without giving a reason, decline to do so.