Slight twist on employment related securities

Slight twist on employment related securities

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A family-owned holding company intends to transfer its minority stake in a trading subsidiary to a shareholder/director, who doesn't work for the company whose shares are to be given to him. 

Am I right to think employment related securities rules apply as usual, because he must be acquiring the shares by reason of employment?  The "personal & family relationships" get-out can't apply because the opportunity isn't being made available by an individual.  That being so, I expect a s431 ITEPA election should be made as a defensive measure.  My concern is that a similar sized shareholding has recently been sold at a substantial premium, due to the particular circumstances of the exiting shareholder.  This is clearly going to be a risk in the negotiations with SAV but I'm particularly concerned that it could influence the value of unrestricted securities if the s431 election is made.

Am I right to think that SSE would apply to the holding company but Sch 23 relief should be available?

I don't think value shifting or depreciatory transactions rules are a problem but is there anything else the shareholders should be considering?

Thoughts appreciated.  

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Nichola Ross Martin
By Nichola Ross Martin
22nd Aug 2014 17:39

Shares to a director?

They are employment related for sure. I am unsure what you mean about defensive s431 as this affects the tax that he pays not the company and it all depends on the restrictions in play. I would be concerned about the income tax charge. There is potential for some alternative planning. Someone may offer that to you for free, if not email me as we charge for that type of service.

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