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Time For A Makeover
MICK RUSE suggests some improvements to the operation of shares valuation. SINCE THE LATE 1980s, life has changed a good deal for Shares Valuation, including a truncation of its name from the slightly military sounding Shares Valuation Division.
Time For A Makeover
MICK RUSE suggests some improvements to the operation of shares valuation. SINCE THE LATE 1980s, life has changed a good deal for Shares Valuation, including a truncation of its name from the slightly military sounding Shares Valuation Division. Moving from Shepherd's Bush, described by the late T A Hamilton Baynes (see Note) as 'dreary' with an office 'as cold as charity', to a prefabricated vision of the future in Nottingham, gave Shares Valuation an ideal opportunity to show its mettle. However, Kenneth Clarke, the then Chancellor of the Exchequer, as well as opening the Revenue's new headquarters also abolished the 50 per cent rate of inheritance tax business property relief for shares in unquoted companies. This 1996 reform left the already depleted jawbone of capital taxation largely toothless so far as Shares Valuation's workload was concerned.
Reinventing itself
With big case arrears and long response times to letters both things of the past, Shares Valuation has set about being more realistic in approach and attitude. One example is that staff are more ready to leave their desks to visit the businesses they value. Another is the establishment of a panel of independent experts from whom staff can take advice where they find themselves at loggerheads with their correspondents. In the mid 1990s, the Government considered selling off Shares Valuation. The idea did not get far and it is difficult to see how Shares Valuation could be privatised in a way that would strike a proper balance between the interests of the Treasury and taxpayers. There are, however, ways in which Shares Valuation could become partly commercial in operation, so as to produce more revenue for the Treasury with the approval of most taxpayers, as I explain in the following paragraphs.
Hypothetical questions
Shares Valuation staff are not required to discuss hypothetical questions, and it is easy to envisage situations where their stance should always be 'no comment'. That said, there are instances where it seems to me an opinion or ruling in advance of a taxable event would be appropriate if payment were made for Shares Valuation's time. Here are some areas which would seem not to be out of bounds: Safeguards would be needed. Shares Valuation staff should have discretion to refuse any applications seeking their agreement to aggressive propositions. Further, to ensure the system is not misused through the provision of inadequate or ambiguous information, all opinions or rulings should be technically non-binding. The question arises as to whether this idea would work in practice, given that negotiations with Shares Valuation in live cases can sometimes extend for a considerable time. The answer is that it would work well, subject to the procedure being approached in the same spirit as, for example, pre-transaction valuation checks which are already used to obtain Shares Valuation's advance agreement to reasonable proposals for enterprise management incentive purposes. How much should the department charge? I doubt my clients would cavil at paying £75 to £100 an hour for true assistance.
Understanding the company
Before a taxpayer's proposal is rejected, Shares Valuation should check that it has sufficient understanding of the company, to ensure its opinion of value is soundly based. There was a time when, if Shares Valuation could not accept a valuation on its initial examination, the most usual reaction was to seek more information before drawing firm conclusions. Currently, Shares Valuation's initial letter will quite often suggest an alternative value which is prematurely conceived. It is unhelpful for those on both sides of the fiscal negotiating fence if the difference between them is unjustifiably wide, and Shares Valuation should therefore always employ caution before either rejecting a taxpayer's proposal or stating its opinion of value. This should not be construed as a disguised plea for Shares Valuation to be more compliant to the wishes of taxpayers. It is a request for the department to approach its work thoughtfully in all instances, and thereby get things right as often as possible. After all, my experience shows that where it takes and keeps hold of the wrong end of the stick, the ultimate result usually works in the taxpayer's favour.
Time keeping
Shares Valuation should log the time that it spends on each case. Taxpayers and their agents always have to be mindful of what tax is at stake before pursuing protracted and necessarily expensive negotiations. Through keeping a record on each case of its notional costs, Shares Valuation could deploy its resources efficiently and equitably. There would then be less opportunity for indulgence in hobby-horses.
Without prejudice
Shares Valuation should desist from the indiscriminate use of the 'without prejudice' qualification. If, in contemplation of litigation, parties negotiate without prejudice, they cannot refer to what they say or write should those negotiations subsequently break down. Shares Valuation probably uses this expression when settling more than half its negotiations, thereby rendering it largely meaningless. Cases settled by way of a genuine compromise, i.e. outside the fairly wide tolerances arising from the inherent imprecision of share valuation, should continue to attract the qualification. However, all other settlements should stand correctly as precedents for future purposes.
Benefits all round
What might be the long term advantages of these suggested improvements? There are several. Taxpayers might start to view Shares Valuation with a degree of affection; Shares Valuation staff would gain extra job satisfaction; and the Treasury would be pleased with the potential extra revenue generated from the implementation of these suggestions. Who knows, Shares Valuation's once 'dreary' existence could even be transformed. Mick Ruse is in practice at 140 Tabernacle Street, London EC2; tel: 0207 300 7345. Note: T A Hamilton Baynes was a chartered accountant whose book Share Valuations was for some 30 years the only specialist work available in the United Kingdom. He was a leading expert witness in both of the big post war fiscal share valuation cases: In re Holt [1953] 32 ATC 4002 and In re Lynall (deceased) 47 TC 375, and lectured extensively on his subject.
