Understanding HMRC EMI Valuations: A Founder's Guide

An EMI valuation is not a generic company valuation — it is a tax valuation, governed by HMRC Shares and Assets Valuation (SVM) practice and underpinned by s.431 of the Income Tax (Earnings and Pensions) Act 2003. The valuation establishes two numbers: the Actual Market Value (AMV) of a share carrying the EMI restrictions, and the Unrestricted Market Value (UMV) — the same share if all restrictions fell away. Both numbers matter and HMRC expects to see both.

AMV vs. UMV — why both matter

AMV is what an arms-length buyer would pay for the restricted share. UMV is what the same buyer would pay if no marketability or transfer restrictions applied. The gap between the two is the marketability discount — typically 15-30% for an unlisted SaaS share, depending on the cap-table dynamics, the rights attached to the share class, and the realistic exit horizon.

What HMRC SVM actually reviews

Three things, in order: the methodology disclosure (have you triangulated DCF, comparable companies and precedent transactions?), the comparable-company set (are they current, sector-aligned, and selection-justified?), and the discount stack (is the marketability discount supported by evidence rather than asserted?). A valuation that ticks all three is materially less likely to be rejected.

The five most common rejection reasons

• Stale comparables — public companies whose multiples have moved more than 20% since the valuation date.
• Asserted-but-undefended marketability discount.
• DCF terminal-value assumption that materially diverges from the implied multiple at exit.
• No churn or NRR sensitivity in the forecast for a SaaS business.
• Single-method valuation with no triangulation.

How long the process actually takes

From a clean data room, an EMI valuation typically takes 7-14 days to prepare, plus the HMRC SVM clock — which can be 4-12 weeks depending on workload. If you are planning a grant around a board meeting or fundraise, work backwards from the grant date by at least 90 days and engage your valuer early. ValuCap delivers signed EMI valuations starting at £350.