Revenue Note for Guidance

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Revenue Note for Guidance

548 Valuation of assets

Summary

This section contains rules for determining market value where this is required for capital gains tax purposes. The situations where the market value of an asset is of importance for capital gains tax purposes include transfers by gift and other transfers by means of bargains not at arm’s length, certain disposals and reacquisitions of trust assets and cases where gains or losses on the disposal of an asset are to be computed by reference to market value at 6 April, 1974. The basic rule is that market value is the price which an asset might reasonably be expected to fetch on a sale in the open market. In the case of shares or securities quoted on a stock exchange in the State or in the United Kingdom, market value is to be based on the quotations as published in official lists. For unquoted shares it is to be assumed that in arriving at the market value full information about the shares is available to the prospective purchaser.

In all cases where the market value of land, buildings, mineral assets or unquoted shares is required to be determined, the inspector should submit the case to the Office of the Chief Inspector of Taxes without entering into any negotiations as to the valuation to be adopted.

Details

General rule

(1) The general rule is that market value means the price which an asset might reasonably be expected to fetch on a sale in the open market.

(2) Provision is made to meet any contention that the value of a large block of assets is necessarily reduced because of the “flooding” effect which would be produced by putting them all on the market at one time. In general, the value of, say, shares is to be taken as the value for one share which emerges from bargains of normal size and condition in those shares, multiplied by the number of shares.

Irish and UK quoted shares

(3)(a)(i) For shares or securities listed in the Irish Stock Exchange Official List the valuation to be taken is the lower of —

  • the price at which bargains in the particular shares or securities were last recorded (the previous price), and
  • where bargains (other than special bargains) in the particular shares or securities were recorded in that list for the relevant date, the price at which the bargains were so recorded or, in a case where more than one price was so recorded, a price halfway between the highest and the lowest prices recorded.

(3)(a)(ii) For shares or securities listed on the London Stock Exchange Daily Official List the valuation to be taken is the lower of —

  • the lower of the prices shown in the quotations plus 25 per cent of the difference between the 2 prices, or
  • where bargains (other than special bargains) were recorded for the relevant date, the price recorded or, in a case where more than one price was recorded, a price halfway between the highest and lowest prices recorded.

(3)(b) Where shares or securities are listed on both lists on the same date, the lower relevant valuation is taken. If some other stock exchange affords a more active market for the shares or securities in question, the valuation is to be based on the quotations in that stock exchange. Where any of the stock exchanges concerned is closed on the relevant date, the market value is to be based on the quotation for the latest previous date or the earliest subsequent date on which that stock exchange is open whichever affords the lower market value.

Unquoted shares

(4) The market value of unquoted shares and securities is to be determined on an arm’s length basis on the assumption that in the open market postulated there is such information available to the buyer as the buyer might reasonably expect from a willing seller.

Unit trusts

(5) The market value of units in a unit trust (whether established in the State or outside the State) the prices of which are published is to be the buying price published by the managers of the trust. The buying price is the lower of the 2 prices published. In the absence of a published price on the relevant date, the figure to be taken is that on the latest previous date.

Appeals against valuation of unquoted shares

(6) Where on a capital gains tax appeal there is a dispute as to value of the unquoted shares in an Irish company, the appeal in so far as it relates to that valuation is to be determined in the same way as if it were an appeal against an assessment made on the company. The object of the provision is to ensure that the authority hearing the appeal may obtain information about the company which may not be available to the shareholder on whom the assessment has been made.

(7) The appeal provisions of subsection (6) apply equally for the purposes of corporation tax.

Relevant Date: Finance Act 2020