VAL231: Step-by-Step Guide to HMRC's EMI Valuation Form

What is VAL231?

VAL231 is the HMRC form used to agree the market value of unquoted shares before they are placed under option through an Enterprise Management Incentive (EMI) scheme. It is sent to Shares and Assets Valuation (SAV), the specialist HMRC team that handles unlisted share valuations.

The form itself is short. The work sits in the valuation report attached to it. SAV will only "agree" a valuation if the methodology, the inputs and the resulting Unrestricted Market Value (UMV) and Actual Market Value (AMV) are properly evidenced.

Why bother agreeing the valuation in advance

EMI is the most tax-efficient share scheme available to UK SMEs, but only if the exercise price is set correctly. Getting HMRC's agreement to UMV and AMV before grant gives you three things:

Certainty on the £250,000 individual and £3 million company limits, which are both measured against UMV at grant.

A defensible exercise price, locked in for 90 days, so employees pay no income tax on exercise (provided AMV is met).

A clean position at exit, when a buyer's due diligence will look closely at every option grant.

Granting EMI options without an agreed valuation is allowed. Doing so on a transaction-bound business is rarely a good idea.

Before you file: documents to gather

A complete VAL231 package typically includes:

Last filed statutory accounts (Companies House) and the latest management accounts, ideally no more than three months old.

Capitalisation table showing all share classes, options already granted, and any convertibles.

Articles of association and any shareholders' agreement, with the restrictions on the relevant share class highlighted.

Business plan or forecast, where forward-looking figures are used.

Details of any recent funding round, secondary sale or offer received, even informal.

Draft EMI option agreement, including vesting, leaver provisions and any performance conditions.

A short note on the proposed grant: number of options, recipients (or at least categories), and the intended grant date.

If any of these are missing or stale, expect SAV to come back with questions before they agree anything.

UMV vs AMV in one page

Two values matter for EMI, and they are not the same.

Unrestricted Market Value (UMV) is the value of the share ignoring any restrictions in the articles or shareholders' agreement. UMV is what HMRC uses to test the EMI limits: £250,000 of unrestricted value per employee and £3 million across all live EMI options for the company.

Actual Market Value (AMV) is the value after applying the restrictions that actually attach to the share: drag-along, compulsory transfer on leaver, pre-emption rights, voting limitations, and so on. AMV is what sets the exercise price needed for the employee to pay no income tax on exercise.

In a typical SME, AMV sits meaningfully below UMV. How much below depends on the specific clauses, not on a generic percentage discount.

Step-by-step: completing VAL231

The form is organised into a small number of sections. The detail goes in the accompanying report, but the form itself needs to be internally consistent with it.

1. Company details

Registered name, company number, registered office, and the date of the proposed grant or grant window. Use the date you actually expect to grant, not the date of the report.

2. Share class being valued

Identify the exact class (for example "Ordinary A shares of £0.0001 each"), with a cross-reference to the articles. If there are multiple share classes with different rights, the class you are valuing must be unambiguous.

3. Proposed UMV and AMV per share

The figures proposed for HMRC's agreement. These must reconcile to the workings in the report. State them per share, to the precision used in the cap table.

4. Summary of methodology

A short paragraph (the detail is in the report) covering the approach taken: earnings multiple, discounted cash flow, recent transaction, asset-based, or a weighted combination. Mention any recent funding round and how it has been treated.

5. Restrictions analysis

A summary of the restrictions in the articles and shareholders' agreement that have been considered in moving from UMV to AMV, with the discount applied. SAV will look here first.

6. Signatory and contact

Usually a director of the company. The point of contact for SAV's queries can be the director, the company's accountant, or the valuation advisor. Whoever it is needs to be able to answer methodology questions quickly.

How to submit

VAL231 is submitted to Shares and Assets Valuation by email, with the valuation report and supporting documents attached. SAV will acknowledge receipt and, in most cases, come back with one of three responses:

Agreement with the proposed UMV and AMV.

Counter-proposal, where SAV agrees in principle but with different figures.

Request for further information, particularly around methodology, restrictions or recent transactions.

Turnaround is typically four to six weeks, but it can stretch significantly when SAV is busy or the file is complex. Plan accordingly if the grant date is tied to a board meeting or an option-holder's start date.

The 90-day rule

Once SAV agrees a valuation, that agreement is valid for 90 days for the purposes of EMI option grants. Any grants made within that window can rely on the agreed UMV and AMV.

If the 90 days lapse, or if there is a material event in the meantime (a funding round, a significant new contract, a credible offer to buy the business), the agreed values can no longer be relied on. In practice you either:

Refresh the valuation and ask SAV to agree the new figures, or

Proceed without HMRC agreement and accept the risk that the values may be challenged later.

For a business approaching an exit or a fundraise, refreshing is almost always the right call.

Top 5 reasons VAL231 submissions get pushed back

In our experience, the same handful of issues come up again and again:

Thin methodology. A two-line justification for a multiple, with no peer set or sense-check. SAV expects to see the working.

2. A recent funding round ignored. If you raised money in the last 12 months at a given price per share, that price is the single strongest data point on UMV. Walking away from it needs a clear explanation.

3. Generic restriction discounts. A flat "30% AMV discount" with no link to specific clauses in the articles will draw a query, and often a reduction.

4. Stale accounts. Management accounts more than three months old, or filed accounts more than 15 months old without an update, undermine the valuation date.

5. Missing restrictions analysis. Submitting a single figure for both UMV and AMV is a red flag, particularly when the articles contain drag-along, leaver and pre-emption clauses (as most SME articles do).

Each of these is straightforward to fix before filing. Each is much harder to fix after a counter-proposal.

What changes with growth shares or hurdles

If you are issuing growth shares (a separate class that only participates in value above a hurdle) rather than ordinary EMI options, the valuation question changes. The hurdle has to be set at, or above, the current value of the existing shares for the growth share itself to have a low initial value. This is usually paired with a Section 431 election to crystallise the tax position on acquisition.

VAL231 can still be used to agree the value of the growth share at issue. See our guide on growth shares valuation for the mechanics.

Where Optival fits

Our EMI valuation service is a fixed-fee £1,950 engagement that includes:

A full valuation report with UMV and AMV per share, clause-by-clause restrictions analysis, and methodology workings.

A VAL231-ready submission pack.

Liaison with HMRC's Shares and Assets Valuation team through to agreement.

A short call to walk you and your accountant through the figures and the exercise price recommendation.

Optival is advisory only. We are not a regulated tax agent and we do not hold HMRC agreements on behalf of clients; the submission to SAV is made in the company's name. What we do is make sure the file we hand to SAV is the one that gets agreed first time.

If you are setting up EMI, refreshing an existing scheme, or cleaning up legacy options ahead of a sale, get in touch for a confidential conversation. Full pricing is available on the pricing page.