A capital gains valuation is needed whenever the law replaces the actual price with market value: gifts and other disposals not at arm’s length, transactions with connected people, inherited assets with no inheritance tax value, and anything you owned on 31 March 1982, which is treated as bought at its value on that date. HMRC will check your figure for free if you send form CG34 after the disposal and at least 3 months before your return is due.

When does a capital gains computation need a valuation?

Most gains are simply proceeds less cost. Section 17 of the Taxation of Chargeable Gains Act 1992 substitutes market value where an asset is acquired or disposed of otherwise than by a bargain at arm’s length, including gifts and transfers into a settlement, and where the consideration cannot be valued or is given for services or employment. Section 18 treats any transaction between connected persons as not at arm’s length, so market value applies even if a fair price was paid.

GOV.UK summarises the common cases:

Situation Market value at
Gifts Date of the gift
Sold for less than worth to help the buyer Date of sale
Inherited asset where you do not know the inheritance tax value Date of death
Owned before April 1982 31 March 1982

Valuations are also needed for negligible value claims. The form CG34 itself lists the main reasons HMRC sees: a 31 March 1982 value, a disposal to a connected person or not at arm’s length, and a check that an asset is of negligible value.

What does market value mean for capital gains?

Section 272 defines market value as the price the assets might reasonably be expected to fetch on a sale in the open market. No reduction is allowed on the footing that the whole holding is placed on the market at once, so you cannot discount a large block of property or shares for flooding the market. Section 18(6) adjusts the value where a connected person gift is subject to a restriction the donor can enforce, such as a restrictive covenant, by deducting the lower of the value of the restriction and the amount its removal would add.

How does 31 March 1982 rebasing work?

Section 35 provides that where an asset held on 31 March 1982 is disposed of, it is treated as sold and immediately reacquired at its market value on that date. HMRC’s manual at CG16700 explains that the result is that only gains or losses since 31 March 1982 are taxed, and that this applies to individuals, trustees, personal representatives and companies.

For capital gains tax, the position is now simple. Since 6 April 2008 the allowable cost of an asset held at 31 March 1982 is its value on that date, and the old kink test, which compared the rebased result with the result on original cost, no longer applies (CG16730). Companies are different: unless a company has made the irrevocable election under section 35(5), it still runs both computations and takes the smaller gain or smaller loss.

Two practical points follow. First, you need a defensible 1982 valuation even if original cost records still exist, because the original cost is no longer relevant for an individual. Second, CG15260 confirms that no deduction is given for notional costs, such as fees, on the deemed sale and reacquisition in 1982, which reflects section 38(4).

How does HMRC’s post transaction valuation check work?

The CG34 service is free and open to individuals, trustees and companies. The key rules from the form and GOV.UK guidance are:

  • You can only apply after the disposal and before you file your return, and the form must reach HMRC at least 3 months before your filing date.
  • You complete one CG34 for each valuation, giving your own figure and the valuation date. HMRC checks valuations; it does not supply one for you.
  • You attach a capital gains calculation with an estimate of the tax, details of reliefs claimed, any valuation report, and the cost and date of acquisition. Share and goodwill valuations need full accounts for the 3 years up to the valuation date. Property valuations need any lease, any tenancy agreement and a plan for undeveloped sites.
  • Individuals, partnerships and trusts send the form to PAYE and Self Assessment; companies send it to their Customer Compliance Manager or Corporation Tax Services. The form must not be sent to a Valuation Office.

If HMRC agrees your figure, it will not question that valuation in your return unless you left out important facts. Agreement on value does not mean HMRC agrees the gain. If it does not agree, it suggests an alternative to negotiate. Shares and Assets Valuation says it aims to agree a valuation within 4 weeks once it has all the information it needs, and to reply to written questions within 10 working days. Within HMRC, CG16700 explains that property valuations are referred to the Valuation Office Agency and other assets to Shares and Assets Valuation.

What if the valuation is not agreed before the filing date?

You must still file on time. The CG34 notes say your return must tell HMRC about any valuation checked but not agreed, and GOV.UK says to enter the gain or loss you expect to be agreed. HMRC may then open an enquiry, and an unresolved valuation can go to the tax tribunal after the return is filed. If you think Shares and Assets Valuation has made a mistake, you can ask for a review by the Assistant Director in charge of that part of the team. See the HMRC enquiry glossary for the terms used.

For UK property, the 60 day reporting deadline usually comes long before the CG34 can be answered. HMRC’s CG34 guidance says you may submit an estimated 60 day property return while waiting and amend it once you have the agreed figure. Our page on estimated figures on a tax return covers how to flag provisional numbers.

Can you deduct the cost of a valuation?

Yes, within limits. Section 38(2) allows costs reasonably incurred in making any valuation or apportionment required for the computation, including ascertaining market value. CG15260 confirms this covers valuations made for the return or for a CG34 check. Costs incurred after the valuation is made, including negotiating or litigating a disagreement with HMRC, are not allowable, following Caton’s Administrators v Couch. The general rules are in allowable costs for capital gains.

How does this look in practice?

Illustration only. Graham bought a paddock in 1975 for £5,000. A valuer puts its open market value at 31 March 1982 at £20,000. He sells it in the 2026 to 2027 tax year for £150,000 with selling costs of £3,000.

  1. His allowable cost is the 1982 value of £20,000, not the £5,000 he paid.
  2. He can deduct the valuer’s fee for the 1982 figure as a cost of the computation, but not any later fees to argue the figure with HMRC.
  3. The gain is £150,000 less £20,000 less £3,000, which is £127,000, before the annual exempt amount.
  4. Because the sale is not residential property, there is no 60 day return. He sends a CG34 with the valuation report well over 3 months before 31 January 2028.

Had he given the paddock to his daughter instead, market value at the date of the gift would replace the proceeds as well, which is covered further in gifting property to children.

What mistakes cause valuation disputes?

  • Using original cost for an asset held at 31 March 1982.
  • Applying a discount for selling a large holding at once, which section 272(2) forbids.
  • Sending the CG34 too late. Requests received less than 3 months before the filing date will not be processed.
  • Giving incomplete information. HMRC says it may be unable to check a valuation if information it asks for is missing.
  • Treating agreement of a value as agreement of the whole computation.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.