Shares Valuation Fiscal Forum 23 July 2002
1. Introductions and apologies
- Apologies read
- SV manual should be published before the end of the year.
- Work continuing on valuation of chattels on co-ownership.
3. Better Quality Service Review
- Review completed and report published internally
- Most of it concentrates on Inheritance Tax but some points relate to SV
- Takes note of SV survey of professional customers
- Suggests improved links with SV's instructing offices and a more proactive approach by staff in progressing cases.
4. SV Performance and Operating Plan
- Overall work for 2002 is down, share option valuations are up.
- Continuing improvement on customer service targets.
- Operating Plan for 2002/03 focuses on improvements to internal procedures and new working methods
- SV to develop a more proactive and investigative approach to handling cases.
- More use of personal contact in negotiations
- More use of Information Powers
- More use of Directions Hearings and Special Commissioners
- SV will carry out PAYE valuations. Applications to Steve Gamble or Richard Lamb.
- This was set for 8 April 2003.
- Panel of experts have so far been broadly supportive of SV's view
Representative Company |
Organisation |
|---|---|
| John Harrison |
PricewaterhouseCoopers, London |
| Brian Edwards |
PricewaterhouseCoopers, London |
| Juliet Eadon |
PricewaterhouseCoopers, Birmingham |
| Roy Hogg |
WJB Chiltern |
| Anne Daly |
KPMG, London |
| Mark Evans |
Parmentier Arthur Services Ltd, London |
| Angela Belsten |
Ernst & Young |
| Fay Walker |
Ernst & Young |
| Bruce Sutherland |
Bruce Sutherland & Co |
| Jenny Nelder | Institute of Directors |
| Keith Eamer | BDO Stoy Hayward, London |
| Lee Whotton | Deloitte & Touche, Nottingham |
| Rob Hicking | Deloitte & Touche, Nottingham |
| Angela Hennessey | Angela Hennessey |
| Tony Hindley | Valuation Consulting Ltd |
| Mahesh Varia Travers | Smith Braithwaite |
| David Haigh | Brand Finance Ltd |
| Errol Danziger | Danziger PLC |
| R Danziger | Danziger PLC |
| Colin Gibson | Shares Valuation |
| Fred Cook | Shares Valuation |
| Mike Fowler | Shares Valuation |
| Reg Malkin | Shares Valuation |
| Graeme Elliott | Shares Valuation |
Apologies
Representative Company |
Organisation |
|---|---|
| Ian Logan |
PricewaterhouseCoopers, Birmingham |
| Louise Speke |
The Law Society |
| Ian Clark |
The Law Society of Scotland |
| Stuart Drummond |
The Law Society of Scotland |
| Steve Lygo |
Parmentier Arthur Services Ltd, St Ives |
| Diane Elliott |
Arthur Anderson |
| John Cooper |
KPMG, London |
| Tim Harding |
KPMG, London |
| John Blamey |
KPMG, London |
| Amanda Allen |
KPMG, Birmingham |
| Alan Wallis | Ernst & Young |
| Ewan Wallace | W D Johnston & Carmichael |
| Wendy Hallam | BDO Stoy Hayward, London |
| Trevor McDonagh | Deloitte & Touche, London |
| Sue Tilstone | Deloitte & Touche, Nottingham |
| Ian Brewer | Valuation Consulting Ltd |
| Mervyn Woods | Confederation of British Industries |
| Colin Paterson | RM2 Partnership |
| Paul Giles | Browne Jacobson |
| John Neighbour | Hardcastle Burton |
| Jonathan Brownson | Royce Peeling Green |
| Richard Fleet | Sir Robert McAlpine Ltd |
| David Perrin | Chartered Institute of Taxation |
| Andrew Caldwell | BDO Stoy Hayward, London |
| Steve Gridley | Shares Valuation |
The meeting was held at the Chartered Institute of Taxation, 12 Upper Belgrave Street, London and was chaired jointly by Colin Gibson of IR Capital Taxes, Shares Valuation (SV) and John Harrison of PricewaterhouseCoopers (PWC)
Colin Gibson opened the meeting at 10.30am and apologies were read.
2. Minutes of the Last Meeting and Matters Arising
Colin Gibson reported that publication of the SV Manual is very close to finalisation. It has all been written and work is now being carried out to format it for the Internet. It is anticipated that it will be published before the end of the year.
Colin Gibson reported that a meeting had been held with interested parties to consider the valuation of chattels in co-ownership. The Revenue was compiling guidelines for further discussion.
There were no other matters arising.
3. Better Quality Service Review of Capital Taxes
Colin Gibson explained that such Reviews have been taking place across the Civil Service. The Review of Capital Taxes is complete and the results have been published internally. The emphasis is on an outward looking approach.
Most of the Review concentrates on Inheritance Tax but the following points arise in respect of SV:
- The Review paid attention to the SV survey of professional customers and recognised the marked improvement reported over the previous survey.
- It referred to the length of time taken to settle some cases. Colin Gibson noted that whilst there would always be some protracted negotiations we have substantially reduced the number of cases that have been running for more than 3 years.
- The report recognised that waiting for replies from professional agents causes some delays. SV are looking at a more proactive approach to address this (more under item 5).
- It noted the relative speed taken to settle share option cases compared to other valuations. Colin Gibson pointed out that it was generally understood that these are not directly comparable but that there are lessons to be learned.
- More personal contact by telephone or meetings was suggested as a way of settling cases quicker. This had been raised at the previous meeting. Again SV are conscious of the fact that such an approach often results in faster settlements and is addressing this.
- It suggested that the links between the Inheritance Tax Group and SV could improve. And also internal processes with the Network, particularly in respect of obtaining files. SV are working on this.
John Harrison asked whether the findings are published for external consumption. Colin Gibson was not sure but will look into it. [Response: In fact they are not, but this summary covers the recommendations relating to SV. Colin Gibson].
4. Shares Valuation Performance and Operating Plan
Colin Gibson outlined key results for the financial year to March 2002
Business Results
- Share Option valuations increased by 27% to 3,750
- Inheritance Tax valuations decreased by about 5% to 4,600
- Post Transaction Valuation Checks reduced by about 38% to 1,000
- Corporate work was down 17% and non-corporate down 10%; total about 10,300.
- This resulted in an overall reduction of work of about 10% matched by a similar decrease in staff numbers. Colin pointed out however that the first 3 months of the current year have shown a noticeable turn around with a large increase particularly in non-corporate work which is up about 10% on this time last year. It seems likely that this results from improved working arrangements with the Network.
- A total of 22,700 cases were settled, an increase of 4%.
- The (untargeted) capital adjustment was £3.1bn.
Colin explained that SV are looking closely at risk assessment procedures in an effort to ensure that only worthwhile cases are taken up for negotiation. John Harrison asked how "worthwhile" is defined. Is it tax determined? Reg Malkin said that tax at stake is obviously a consideration but the main objective of the exercise is to maximise cost effectiveness by deciding at the earliest possible opportunity whether or not valuations fall within an acceptable range.
John Harrison expressed some concern that values may be accepted on
risk assessment despite an inappropriate approach being used to produce
the value. He felt there might be a danger of confusion if subsequent
valuations using the same methodology were rejected. It was accepted
that publication of 'normal' valuation guidelines in the SV manual should
help to minimise this. But this was an anticipated consequence of the
'process now, check later' SA system.
David Haigh asked whether the manual would include a section on the
valuation of intellectual property. Fred Cook said that it would not.
It was a matter for debate whether a chapter should be written but to
date the time and opportunity had not arisen. Views over this were mixed.
Some felt that a few words would be worthwhile; whilst others felt that
this is too complex a subject to tackle in a broad guidance manual.
Bruce Sutherland pointed out that there was nothing in the SA return
to encourage taxpayers to submit a professional valuation. He suggested
that the use of professional valuers would minimise the number of cases
where the valuation might be challenged. Colin Gibson agreed that this
might be the case but said that the requirement was for the taxpayer
to submit a reasonable estimate. The degree of complexity will vary
enormously and it had to be up to the taxpayer to decide if it was worth
the cost of employing a professional valuer.
Customer Service
- 85% of cases were settled within 12 months demonstrating a continuing trend. The average settlement time was down from 7.3 months to 6.5 months, perhaps influenced by fast turnaround on share option schemes.
- Cases older than 3 years were down to 275. John Harrison asked how cases were reviewed. Reg Malkin explained that all cases should be seen at B2 level after one year and no case should go beyond 3 years without having been seen by an Assistant Director.
- Post timeliness continues to improve with 89% of responses within 15 working days.
- Under the new Quality Assessment system 95% of cases were handled to a "satisfactory or better" standard.
The Operating Plan for 2002/2003 focuses on:
- Improved internal liaison and communications
- Developing the (internal) Intranet
- New working methods (see 5 below)
- Improving risk assessment procedures
Fred Cook outlined SV's plans to develop a more proactive and investigative approach to its work.
The environment within which SV operates is changing. For example the recent 'substantial shareholdings' legislation will reduce the work from the Large Business Offices but the reorganisation of the Network offices should result in more referrals from them. The Network will expect work to be carried out quickly and effectively. This will require effective risk assessment and the introduction of key indicators to measure performance.
The changes will include:
- A more proactive approach in obtaining the information required to decide whether a valuation could be accepted. SV are looking to improve the procedures for obtaining CT files for instance.
- A more proactive approach recognising that not all delay on valuation work emanates from the Revenue. More pressure will be put on taxpayers and agents to respond quickly to queries and provide information. Timescales and timetables will be requested in appropriate cases.
- More meetings and telephone calls to settle matters.
- More direct contact with taxpayers where appropriate
- More use, where appropriate, of Information Powers such as IHT Information Notices and S.19A Notices in SA cases. Colin Gibson has been delegated the power to issue S.20 TMA first and third party notices.
- More use of the Appeals Team where there is deadlock, where third party enquiries are required and for assistance on Information Notices.
- Seeking to take cases to the Special Commissioners (and General Commissioners where appropriate - e.g. goodwill) without the involvement of the Solicitor's Office and to seek Directions Hearings more frequently.
Angela Hennessey asked if the taxpayer could request a referral to the Appeals Team. Colin Gibson explained that the Appeals Team is an internal function and to have a policy of allowing taxpayer referrals would undermine the management structure within SV. If a second opinion is required or if an agent or taxpayer is concerned about the way in which a case is being worked then the proper course must be for a request to be made asking that it be reviewed by the valuer's manager.
Angela Belsten pointed out that a Tax Bulletin in August 1998 advised that employers could check the reasonableness of their valuations with SV. However she had encountered an occasion where the SV officer had insisted that such valuations must be directed through the Inspector.
Mike Fowler confirmed that SV are happy to look at such requests though there are practical implications such as the monthly payment of PAYE meaning little time for detailed valuations. He asked that as much information as possible be provided and that any requests be headed 'SV (PAYE Valuations)' and addressed to Steve Gamble or Richard Lamb in Nottingham.
Colin Gibson noted the relatively few agenda items and was concerned that the agenda may be thin if the next meeting is 6 months hence. He suggested that it be pushed back to next Spring when the SV Manual should have been published and SV's end of year results will be known. This was accepted as sensible and 8th April 2003 was agreed as the date for the next meeting.
Keith Eamer asked what SV's experience of the panel of experts was so far. Fred Cook replied that the experts have so far been broadly supportive of SV's view.
There being no other business the meeting ended at 12.45pm.
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