When a company considers CREST share registrar services, it should also give some thought to how its listed shares are to be valued, particularly in light of a change to the rules concerning the valuing of listed shares or other securities for CGT and other tax purposes. The changes have been in force since 6th April this year, and organisations affected may appreciate London Registrars’ guidance on how these shares should now be valued.
Certain circumstances require the valuing of assets at market value for CGT purposes, such as in the case of gifts or other non-arm’s length transactions. For example, there are specific rules for valuing listed shares’ or other securities’ market value for CGT purposes. However, it may also be necessary to ascertain the market value of listed shares for other purposes, such as for the income tax treatment of securities related to employment.
For many years up to early April 2015, the market value of listed shares and securities was calculated as the lower of the two prices displayed on the Stock Exchange Daily Official List, plus one quarter of the difference between those two figures. This made it necessary to apply a rather convoluted calculation in figuring out the market value, which was computed as the value of the lowest bargain made that day, plus one quarter of the difference between that value and the value of the day’s highest bargain.
Although HM Treasury has had the power to alter these provisions since 2007, it did not actually do so until now, following a recommendation by the Office of Tax Simplification. It all means that since 6th April 2015, a new valuation basis has applied. According to the Market Value of Shares, Securities and Strips Regulations 2015, the market value is now taken as the mid-point between the quoted closing “buy” (or “bid”) and “sell” (or “ask”) prices.
In summary, since 6th April 2015, it is the closing mid-price – that should be used to calculate the market value of listed shares and securities. Those observing share prices in the printed press are urged to refer to the following day’s publication for the previous day’s price.