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Transfer of shares from deceased estate - subject to PAYE?
Posted by Anonymous on Thu, 02/07/2009 - 11:18
One of my clients is a two man company. Director 1 died recently. Both directors had personal insurance policies in personal names, and Director 1's policy paid out on death to the estate in trust. His share passed to the executor, who gifted it to Director 2 at par value. This arrangement was agreed between the directors at the outset.
I presume that there are no PAYE consequences for Director 1.
Please can anyone confirm their understanding of this to me?
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PAYE should not be an issue, but ...
... it is possible that the transfer of the share could be taxed as employment income based upon its market value. However, in the circumstances I think that there is a strong argument that the share was not acquired by reason of employment but in the capacity of shareholder. The share could however still be employment-related unless it was acquired in the normal course of family or personal relationships. As the transfer seems to arise from a prior agreement I don't see that applying, but of course don't know the full circumstances.