The reporting of disposals of assets for capital gains tax purposes under the rules of assessment often require opinions and, in particular, valuations. The need for valuations might arise because:
• the asset was owned prior to 31 March 1982
• it is being disposed of to a connected person (eg on incorporation of a business)
• to make a claim for a capital loss arising from 'negligible value'

Case law has established (Langham v Veltema [2004] STC 544) a need for the taxpayer to disclose valuations in calculating tax liabilities (eg a March 1982 valuation for an asset that is subject to a capital gain) on the relevant tax return. In such cases, it is essential that adequate disclosure of the basis of the valuation is made. HM Revenue & Customs (HMRC) have issued guidance on what is adequate disclosure in such cases in the form of Statement of Practice 01/06 and the following extract is relevant to disclosing valuations:
"Most taxpayers who state in the Additional Information space at the end of the Return that a valuation has been used, by whom it has been carried out, and that it was carried out by a named independent and suitably qualified valuer if that was the case, on the appropriate basis, will be able, for all practical purposes, to rely on protection from a later discovery assessment, provided those statements are true."

Of course, even the disclosure of information in a self assessment tax return does not mean the valuation is agreed. It may be some time after the disposal before HMRC refers the matter to a specialist valuer. The agreement process can be speeded up by requesting a valuation as soon as the disposal has occurred using a 'post-transaction valuation check'. This check can be applied for by using form CG34 found at: http://www.hmrc.gov.uk/forms/cg34.pdf. The form must be submitted at least two months before the filing date for the tax return.

As with all such tax situations, advice should also be sought before proceeding.

Alan Boby
Partner
Ellacotts LLP"

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