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Capital gains on shares

2 Directors have 100 shares, 1 director leaves, new director appointed, any CG for new director

Limited company has 2 dirctors each holding 100 shares. 1 director retires and is paid £20,000. The new director is appointed and takes over these 100 shares.

Will the new director have to pay any capital gains tax?

Turnover of £300,000 last financial year.

Kind regards

 

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By Ruddles
09th Nov 2017 14:00

Yes
No
Maybe

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09th Nov 2017 14:10

No, purchasers only have to pay capital gains tax when the turnover of the company exceeds £0.5 million.

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By Ruddles
to Portia Nina Levin
09th Nov 2017 14:15

Bu88er - when did that limit change, Portia?

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By Matrix
09th Nov 2017 14:38

I don't know what you mean by the new Director taking over the shares - has the outgoing Director sold the shares to the new Director for £20k? Not a bad return for a company that has been going for 5 weeks.

I assume that you asked the company's accountant the tax treatment of the £20k paid by the company in advance and that the Directors have agreed a market value for the shares. Also that the accountant has considered whether these are employment related securities.

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09th Nov 2017 16:43

I love these sorts of questions. Excellent training material for my trainees

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09th Nov 2017 17:30

Sorry. I have been informed the director leaving is being paid £xxx as grew helped grow the business. Once all the money has been paid over the director shall be taken off and a new director added. The new director was wondering if there would be any capital gains to pay as this is a profitable business of around £300,000 turnover.
This is just a change in directorship.

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to WayneVass
09th Nov 2017 18:27

WayneVass wrote:

Sorry. I have been informed the director leaving is being paid £xxx as grew helped grow the business. Once all the money has been paid over the director shall be taken off and a new director added. The new director was wondering if there would be any capital gains to pay as this is a profitable business of around £300,000 turnover.
This is just a change in directorship.

It's not clear whether this is your company that you are talking about or one that you are advising. Either way, it is abundantly clear from your postings that you are not qualified to deal with the matter and the only sensible thing for the company to do is to consult a tax adviser as a matter of urgency.

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09th Nov 2017 20:26

The reason you are getting some schtick is because your profile shows that you are an accounting director of the company for whom you work and you are asking what, to any half decent accounting professional, is a stupid question.

Capital Gains Tax is a tax on the profit when you sell (or 'dispose of') something (an 'asset') that's increased in value.

It is not a purchaser's tax, but a seller's tax.

Buy as many shares as you like, you will never have a cgt liability on the purchase. The director who sold them, on the other hand, may well have.

As has been mentioned above, you need to look at the employment related securities obligations aswell.

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