Employee receiving shares - some questions

Employee receiving shares - some questions

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A client company is planning on giving a long term employee some shares in the company.

I have some questions.

Firstly this link. Does this make any difference to the tax situation? If not, how does it fit into the scheme of things?

Secondly I know that the valuation of shares to employees cannot be reduced for the fact that they are a minority interest. Can the value be reduced due to them being non voting shares? The company has a number of different ordinary share classes already, some voting and some not.

Thirdly, is it possible to request HMRC clearance on the valuation, through non statutory clearance procedure or CG34?

Finally, as the shares aren't being paid for there is a notional salary, or can the tax part be treated as a P11D item and the NIC as a PAYE item?

I am aware of the HMRC online return of employee related securities requirement.

Thanks for any advice.

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By Portia Nina Levin
10th Sep 2015 11:11

You should refer this to someone that knows what they are talking about, but to answer your questions:

Using the employee shareholders rules may have a bearing. It will depend on the value of the shares being given, and whether the employee is prepared to give up the employment rights in exchange for them; possibly not since they will be receiving them anyway and the tax consequences on issue will only be mitigated in respect of the first £2,000 of value.How do you know that the valuation of shares cannot be reduced by virtue of being a minority interest? Because they can. They can also be discounted for the fact that they are non-voting. Neither of these things would cause the shares to fall within the definition of restricted securities. If they fall within the definition of restricted securities the employee effectively has a choice of being taxed currently on either the value with or the value without the relevant restrictions. If they choose with, then they will get a further tax charge as and when relevant restrictions are lifted. As to anything that affects the value that is not a relevant restriction, if that thing changes, there can be a further tax charge on the change, in any event, subject to exactly what has happened.CG34 is not relevant. There are separate procedures for agreeing valuations on employee shares, depending on circumstances.If the shares are not readily convertible assets, they just go on the electronic form 42 equivalent, and on the individuals tax return. If they are readily convertible assets they are treated as pay, and there is a loan benefit charge until such time as the amounts are actually recovered from the employee. They do not touch from P11D.

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Replying to WhichTyler:
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By newmoon
10th Sep 2015 14:35

i will PM you

Thank you Portia. I will send you a Private Message.

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