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Fiscal valuation

The key to successful tax planning often hinges on fiscal valuation. It is absolutely critical to get the valuation right. Valuations for tax purposes can differ significantly from those for other purposes and should therefore be performed by specialists familiar with their unique parameters.

Tax valuation is complex and requires experience to determine appropriate application. For example, there are several definitions of value (depending on the exact nature of the tax charge), which can produce substantially different outcomes. Successful planning therefore needs to incorporate two key elements:

  • A reliable estimate of the value likely to be ascribed by the relevant tax authorities; and
  • The ability to robustly defend the valuation at the heart of the planning, in the event that negotiations with the tax authorities are required.  

Deloitte’s Fiscal Valuation Group is widely recognised as one of the leading service providers in this area.

Issues and trends

  • Many management and employee equity incentive schemes are “underwater” as a result of the continuing economic turbulence. Valuation is vital in establishing the efficiency of such schemes and in “resetting” the performance conditions, in order for them to continue to act as effective incentivisation tools.
  • During the course of a transaction, valuation can be vital in managing the effective rate of tax for management.
  • With a general renewed interest in pension planning and the ability for Self Invested Personal Pensions (SIPP) and Small Self Administered Small Schemes (SSAS) to invest in unquoted business assets, valuation is key in maximising the benefits of planning opportunity.
  • Business incorporation and LLP conversions of existing businesses require a valuation of the existing underlying goodwill. Often this valuation can be critical to optimising the tax reliefs available to the newly incorporated company.

Valuations are driven wholly by a well established body of case law. There has been a recent flurry of decisions in Tribunal cases. In each case, the potential implications of these decisions need to be considered and fully understood.

Our approach

  • Delivers a comprehensive valuation solution: from advising on effective structuring, to predicting the probable treatment by the relevant tax authorities and ultimately assisting a client in agreeing values with them.
  • Combines taxation expertise with a sound understanding of valuation theory and the case law, precedent and practice in place specifically for tax valuations.
  • A pragmatic, commercial, problem solving approach.

Solutions and services

What does the Fiscal Valuation Group do?

  • We help our clients understand what the tax authorities are likely to say in relation to valuation; and
  • We help clients negotiate values with tax authorities on behalf of clients.

Some of the more common valuations that we undertake include the valuation of management equity incentives, the valuation of subsidiary companies and intangible assets and valuations for capital gains and inheritance tax purposes.

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