Cleggy1
Blogger
Share this content
0
627

An employee becoming a shareholder - implications

An employee becoming a shareholder - implications

An employee was paid low wages whilst a business got off the ground. It was always agreed that he would become a shareholder once the business took off. It has now been agreed that he is to get 1/3 of the company. The company had no value whilst the business was been developed as it was an all or nothing project. It has been successful and now has a value.

If the company is now worth £500,000 how can the tax be minimised?

Replies

Please login or register to join the discussion.

avatar
01st Mar 2016 12:42

I am no expert

But I suspect that he should have been given a formal share option at the outset.  Ages since I have done this but from memory this would have fixed the value at the start date.  Others will know more!

Thanks (0)
avatar
By JimFerd
01st Mar 2016 14:20

It sounds  to me like he is

It sounds  to me like he is just going to be given a share of the company in return for his ongoing services.

Assuming the company isn't listed and that there isn't an impending sale of the shares, then this would be a BIK in the hands of the employee at the date the shares are transferred.

There'll also be a capital gain for the person transferring the shares. ER and holdover relief may be available.

As the above poster has said - I'm also no expert on this though, and there could be a couple of options available, although these may be quite limited for unlisted companies for the value of shares to be transferred (£167k) you are referring to.

Thanks (0)
Share this content