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12 October 2021
Calculating the value on a share disposal to employee.
I am considering the possible share value for 24% of the ordinary shares in a very small company owned and managed by a husband and wife.
It is a publishing company with turnover of about £400 000 a year. The company does not own any property or non-trading assets.
The husband and wife are considering gifting or selling shares to a key employee. I therefore need to estimate a market value that would be acceptable to HMRC.
The main facts are:
- retained profits are £140 000;
- the director/shareholders have been taking low salaries plus dividends. Average profits after tax have been £40 000. However if fair salaries were included for the directors there would have been losses. On this basis I would conclude that maintainable profits are nil.
Using an earnings basis to value the shares it would seem...
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