What is VAL231? Complete guide

When do you need VAL231?

VAL231 is the HMRC form used to agree the market value of shares granted under an Enterprise Management Incentives (EMI) scheme. It is submitted to HMRC's Shares and Assets Valuation (SAV) team before the options are granted, so the company and its option-holders know exactly what tax treatment will apply.

You need to submit VAL231 in three typical situations:

• You are about to grant EMI options to employees and want HMRC to agree the share value in advance.
• You are granting EMI options with an exercise price set at a discount to market value, and need both the Unrestricted Market Value (UMV) and the Actual Market Value (AMV) to be agreed.
• You are using growth shares or hurdle shares inside an EMI scheme and want certainty on the starting value.

Submitting VAL231 is not legally compulsory - a company can self-assess the value. In practice almost every EMI grant uses VAL231 because it removes future challenge: once SAV agrees the value, that figure is locked in for the grants made within the validity window.

Who submits it?

VAL231 is normally submitted by the company's valuation advisor on behalf of the company. It can also be submitted directly by the company, by an accountant, or by a tax advisor.

In practice the submission package contains three components:

• The completed VAL231 form (company details, scheme details, proposed UMV and AMV)
• A supporting valuation report explaining the methodology and evidence
• Supporting financial information - typically the latest audited accounts, management accounts and forecasts

The valuation report is what SAV actually reviews. The form itself is mostly factual. A weak report is the single largest cause of delays and challenges.

Timeline

The standard SAV turnaround for VAL231 is published as four weeks, but actual response times vary depending on workload and the complexity of the case.

Plan for 6 to 10 weeks end-to-end if you want certainty before a grant date. Cases with a clean methodology, recent funding evidence and clear financial information clear faster. Cases involving growth shares, recent restructurings or no third-party evidence take longer.

How HMRC reviews it

SAV reviews the submission against the legal definition of market value in section 272 of the Taxation of Chargeable Gains Act 1992 - the price that the shares would reasonably fetch on a sale in the open market.

In practice SAV looks at:

• Methodology - has an appropriate method been used (multiples, DCF, net asset value, option pricing for growth shares)?
• Comparables - are the listed or transaction comparables genuinely comparable in size, sector and growth profile?
• Recent transactions - is there a recent funding round, secondary sale or buyback? Those carry significant weight.
• Discounts - is the discount for lack of marketability (DLOM) and any minority discount justified and benchmarked?
• UMV vs AMV - if restrictions reduce the AMV, are they actually enforceable and reflected in the articles?

SAV does not value the company itself. It either agrees the submitted value or asks structured questions. A clear, defensible report shortens the review and reduces the risk of a counter-proposal.

Common mistakes

Avoiding these issues is most of the battle. A clean first submission is typically agreed within the published timescale.

How long is it valid?

A VAL231 agreement is valid for 90 days from the date of the agreement letter.

Any EMI options granted within that 90-day window can rely on the agreed UMV and AMV. Options granted after the 90-day window cannot - the value must either be re-agreed via a fresh VAL231 or self-assessed at the time of grant.

In practice this means:

• Time the submission so the 90-day window covers your planned grant date
• If grants slip beyond 90 days, the company can re-submit a refresh; SAV will often agree it quickly if nothing material has changed
• A new funding round, acquisition, major contract or restructuring inside the 90 days invalidates the agreement - a fresh submission is needed

Real example

A UK SaaS company with revenue of £4.2m and an Ordinary share class wants to grant EMI options to its first five engineering hires.

• Recent evidence - a Series A round closed 4 months earlier at £18m post-money for Preference shares.
• Methodology - the advisor uses a backsolve from the Preference round price, applies a waterfall to derive the Ordinary share value, then applies a 25 percent DLOM.
• Result - UMV of £0.72 per Ordinary share, AMV equal to UMV (no further restrictions in the articles).
• Submission - VAL231 plus an 18-page report explaining the backsolve, waterfall and DLOM benchmark.
• Outcome - SAV agreed the values without question in 3 weeks. The 90-day window covered the planned grant.

This is the pattern that works: clear evidence, transparent methodology, defensible discount, agreed first time.

FAQ

Related guides

• What is HMRC SAV? - background on the HMRC team that reviews EMI valuations
• UMV vs AMV explained - the two values that always appear on VAL231
• Section 431 elections - the related ITEPA election for restricted shares
• EMI valuation guide - the full end-to-end EMI valuation workflow