EMI Share Valuation: HMRC AMV and UMV Methodology

AMV versus UMV explained

HMRC EMI valuations require both Actual Market Value, used to set the option strike, and Unrestricted Market Value, used to test the £250,000 individual and £3 million company limits at the grant date. Actual Market Value (AMV) is the value taking restrictions into account, for example transfer restrictions in articles of association, leaver provisions, or compulsory transfer clauses.

AMV is typically 15 to 35% below UMV for typical SME articles. Both figures are needed: AMV is used to set the option exercise price and the employee's income-tax position on exercise; UMV is used to compare against the EMI scheme value limits and individual grant limits.

The Valuation Office Agency format

HMRC's Shares and Assets Valuation team expects a specific format: company background, shareholding structure, financial summary, valuation methodology (typically adjusted EBITDA multiple with cross-check), comparable evidence, valuation conclusions, and an explicit statement of the AMV and UMV per share. Submissions outside this format invite delays and queries.

The timetable

From engagement to HMRC agreement typically takes 4 to 6 weeks: 1 to 2 weeks to build the valuation, 1 week for company review, submission to HMRC, and 2 to 4 weeks for HMRC response. Once agreed, the valuation is valid for 90 days for new grants. Renewing the agreement is straightforward if the business position is unchanged.

Common mistakes to avoid

First, valuing on last year's accounts when current trading is materially different. HMRC will challenge a valuation that does not reflect current performance. Second, ignoring or under-stating the restriction discount, which leaves AMV equal to UMV and triggers HMRC pushback. Third, using sector multiples without explaining their source or relevance. Fourth, missing the comparable evidence section entirely.

When the share class structure matters

Where the company has multiple share classes with different rights, the EMI shares must be valued specifically. Often a separate growth-share class is used for EMI to manage the AMV and align employee returns with future value creation. The valuation must reflect the specific economic rights of the EMI shares, not the rights of ordinary shares.

Post-grant compliance

EMI grants must be notified to HMRC within 92 days of grant. Annual returns are due each July. Disqualifying events (the employee leaving qualifying employment, the company ceasing to qualify, certain corporate transactions) trigger specific tax consequences that need monitoring throughout the option period. We support clients through the full compliance cycle, not just the initial valuation.