Gift of Shares

Gift of Shares

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A private limited company wants to gift shares to key staff. Is it the general consensus that private limited company shares are not readily convertible assets and therefore PAYE and NIC cannot apply?

If the above is the case then can I just check that the employee would then declare the value of the shares via the self-assessment return and pay income tax at the relevant rate according to the value of the shares received. Is there a requirement to get the value agreed up front or can the return just be submitted with the value as derived by the directors?

If the employee was not UK resident and performed no UK duties, I presume there should be no UK income tax charge for the employee, however the company would need to report the transaction as normal on form 42 (and could still claim the corporation tax deduction). Is this correct?

Many thanks in advance.

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Nichola Ross Martin
By Nichola Ross Martin
28th Jun 2012 10:52

Employment related securities = Part 7 ITEPA 2003

If the shares are no tradeable and nothing is arranged to ensure a buyback then the shares should be RCA, unless no CTax relief is available (don't issue shares in subsidiaries).

Valuation is always the tricky part because each company is different, you can do a post transaction valuation chekc with HMRC, but most employers want to be able to warn the employee of their potential tax bill up front. You will need to decide on a s431 election at the time of the share award.

Re: non UK employees - I would check the tax coding first, but you need to report on form 42.

EMI options are another way around it, may be cheaper is you are planning an award in stages.

Virtual Tax Support for accountants: www.rossmartin.co.uk

 

 

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