Sale of shares in unlisted company

Sale of shares in unlisted company

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Could you please confirm the tax position for a client who has been a director for over 20 years in an electrical manufacturers and is now retiring.  She has received a substantial sum for her 50% shareholding (unlisted company), this will be paid over a four year period in three instalments.

Would she be liable to income tax/CGT or both and would the client qualify for ER?

Thanks

Dom

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By User deleted
13th Jun 2015 10:20

On the information presented ...

... I'd say CGT, with ER. But you know more about the client than I do.

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By johngroganjga
13th Jun 2015 10:24

Nothing in what you say indicates that any of the conditions to qualify for ER might not be met, but there is no substitute for checking off the conditions one by one.

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By pjones
13th Jun 2015 12:46

Purchase of own shares?
you also don't say who has bought the shares? The other sharholder(s) or gave these been bought back by the company?

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By Nickwill
13th Jun 2015 12:49

Eligibility

From the information it sounds as if your client satisfies the requirements for ER relief.

The requirements are as follows - 

If you are selling shares

- you have at least 5% of shares and voting rights in the company (50% shareholding).

- you’re an employee or director of the company (or one in the same group). (director for 20 year).

- the company’s main activities are in trading (rather than non-trading activities like investment) ( trading company - electrical manufactures). 

 

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Out of my mind
By runningmate
13th Jun 2015 12:54

Ask her accountant

I am assuming you are not her accountant but are advising her how to invest the (net) proceeds.  You really need to liaise with her accountant who should have fully advised her of the tax implications of the deal (both in terms of the amounts of taxes arising & the due dates for payment).

No doubt she will have gone through all the tax implications with her accountant before agreeing to the share sale.

RM

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By dominic.vidler
14th Jun 2015 12:17

Thank you.

Client selling back to the company.

Dom

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By johngroganjga
14th Jun 2015 13:07

In that case the first question you need to ask her accountant is whether the purchase met the conditions to be treated as a capital transaction in her hands, without which questions about ER etc. are academic. The fact that payment is being made by instalments suggests that capital treatment will not be available, but her accountant will be able to explain all this.

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By pjones
14th Jun 2015 15:13

Agree - no ER
Sounds like it will not qualify for capital treatment and will be subject to income tax. Presumably she has taken advice on this before the transaction took place?

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By gbuckell
15th Jun 2015 10:58

Company law

It is not just a question of whether the transaction qualifies for capital treatment. If payment is by instalments as stated then it is in breach of company law and therefore is void. Given the background it would be relatively easy to structure this in a way that is both legal and eligble for capital treatment (and hence ER). The best way to achieve this will depend on a more detailed knowledge of the background and the parties involved.

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By User deleted
15th Jun 2015 11:00

Same old story

Insufficient information in the question leading to duff advice (mine).

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