Trust Taper Relief

Trust Taper Relief

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An company is to sell 16% of its share capital to 5 individuals, all of whom work full time within the business.

Each individual would own < 5% of the share capital and would not qualify for business asset taper.

If however the 16% was put into trust with them as trustees. Would there be full taper available on any eventual gain as the trust owns > 5%.

Any ideas would be appriecated
Chris Walter

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By wdr
05th Aug 2003 16:59

Watch FA2003 . Incidentally the 5% rule only applied before 5th
unless the company is listed.

If the company is listed, then a trustee holding will give the result suggested[prior to 5thApril 2000the trust holding had to be 25%], but so will merely being an employee of a company in the same group.

So the only issue is whether the company is a trading company or member of a trading group[without which BTR isn't available anyhow]and to ensure that the value attributable to the shares is not an undervalue

BUT...

FA 2003 Schedule 22 has introduced new rules about employees' incentive schemes. You will need to look very carefully at the exact circumstances surrounding the issue to be sure that any profit is not categorised as income assessable under Schedule E [rather than as a chargeable gain]. If that happens taper relief goes out of the window.

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By barryhallam
05th Aug 2003 16:27

Are you sure
It sounds to me that the shares would be business assets in the hans of the employees either because the company is unlisted or if it is listed they do not own a material interest (i.e. less than 10%)

A more important issue may be the valuation of the shares. If they are sold at an undervalue there could be an income tax /NIC charge.

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