Market value, not the handshake price
Passing shares to the next generation, or selling them into a family investment company, feels like a private matter with a private price. For CGT it is not. Where a disposal is between connected persons, or is otherwise not a bargain at arm's length, the consideration is deemed to be the open market value of the shares on the date of disposal (CG14530, HMRC). Connected persons include your spouse or civil partner, children, parents, siblings and their spouses, and a company is connected with you if you control it alone or together with persons connected with you. The low price saves nothing on the CGT side, though the same figure becomes the buyer's base cost for their own future disposal. Our guide to selling shares in your company covers the full mechanics, including how the deemed proceeds interact with Business Asset Disposal Relief.
Valuing a minority holding, and testing the number with HMRC
Market value has a statutory meaning: the price the shares would fetch in an open market sale between a hypothetical willing seller and a hypothetical willing buyer. Crucially, what is valued is the actual holding transferred, not a proportionate slice of the whole company, and valuation case law recognises discounts from whole-company value for minority holdings and for unmarketability, though HMRC treats the size of any discount as a question of evidence in each case. That can sharply reduce the deemed proceeds on a gift of a small stake. The figure can be tested: after the disposal, and before your filing deadline, you can ask HMRC's Shares and Assets Valuation team to check your valuation on form CG34, and they aim to agree a valuation within four weeks of a complete request (GOV.UK). For any sizeable family transfer, a professional valuation with contemporaneous evidence for any discount is the cost of sleeping at night.
Holdover, instalments and the traps in the base cost
Two pressure valves exist. Gifts of unquoted trading company shares commonly travel with a joint holdover claim under helpsheet HS295, so no CGT is paid at the time; the price is that the recipient's base cost is reduced by the held-over gain, which resurfaces when they eventually sell, and on a sale at undervalue only the balance of the gain is held over. Where holdover is not available in full, the CGT on a gift of unlisted shares can be paid by ten equal yearly instalments by written election, though interest runs on the unpaid balance and the whole amount falls due if the recipient sells (CG66452, HMRC). A gift or sale at undervalue can also raise inheritance tax questions, covered in our guides to CGT on gifts and family transfers and business property relief. Horizon UK Tax Solutions handles connected-party disposals, valuation evidence and CG34 checks on fixed fees agreed upfront, with complex work from £750; book a free 30-minute clarity call before you fix the price.