Warrants for free - Are they taxable?

Warrants for free - Are they taxable?

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Hi.  Friday afternoon and I get this question!!!  Please help.

I have a client who assists in putting people together.  He went on 'a bit of a personal mission to help a friend find some key financiers and investors and ended up being granted a number of warrants to buy shares in the company for free as a thank you'.  At no point was there any contract for services or agreement drawn up.

My client has now chosen to cash in the warrants as the company has begun to do well and consequently sold the warrants for £200,000 but invoiced a 3rd party through his company for the sale of the warrants.

I am left with two questions.

1    Should he pay income tax on the receipt of the warrants.  As his business is general in contract negotiating, advising on security matters and assistance in disputes and company investment am I right in concerning myself that he might need to pay income tax and national insurance on the 'value' of the warrants he was granted in the year he received them?

2    Presuming that he then transferred the warrants to his Ltd, (crystallising a capital gain on any uplift in value), I presume the company then suffers Corporation Tax  on the subsequent uplift in value from when it acquired the warrants from him?

If anyone can give me a steer in the right direction (i.e. relevant legislation/guidance) I really would appreciate it.

Have a great weekend.

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By chicken farmer
21st Jul 2014 07:43

Yes and yes
You've answered your own questions

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