Valuing partnership interests

In “From the Courts”, on p. 6, there is a note of the Court of Appeal decision in Ham v Ham and Another [2013] EWCA Civ 1301. This was a decision on the price to be paid to an outgoing partner by the continuing partners, in respect of his interest in the partnership. The partnership was a family farming partnership, and the difference between the parties was, essentially, as to whether values to be used were based on “book values” or “market values”, especially in relation to the land being farmed. The issues raised by this decision will be of particular interest to practitioners with a rural clientele. However, they should also be of wider concern to IHT planners, whose clients seek to obtain Business Property Relief at the rate of 100%. This is, of course, available for shareholdings in unquoted “trading companies”, including those whose shares are dealt in on the Alternative Investment Market and certain other trading platforms and markets. When there are no trading opportunities for unquoted shares, then the market value, especially of a minority shareholding, may be very low. This does not just offer the chance of IHT mitigation. It may also reflect the reality of the minority shareholders’ inability to influence the management of the company or directly access the possible substantial capital value of the asset held in the company. Where the object is to pass on wealth, in the form of valuable business assets, to a number of beneficiaries a partnership may be seen as a better vehicle.