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Employment related securities - gift shares

My client is a limited company owned 60/40 by 2 directors shareholders.

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My client is a limited company owned 60/40 by 2 directors shareholders.  The larger shareholder wants to gift 5% of the company to the other so the new shareholding would be 55/45.

I understand there will be capital gains tax implications for the larger shareholder, although gift releif will be available.

for the smaller shareholder, I beleive this transactions will fall within employment related securities and income tax to pay.  What would happen if the 5% went to the smaller shareholders wife and not him.  She is not an employee or director of this company.

 

Thank you in advance

 

 

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By Tax Dragon
23rd Sep 2021 16:55

kedgley123 wrote:

What would happen if the 5% went to the smaller shareholders wife and not him.  She is not an employee or director of this company.

The shareholdings would be 55/40/5.

Yay, I love a good maths question.

Btw, I think you should read s421B(1) ITEPA 2003. Also read the rest of that section.

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Replying to Tax Dragon:
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By The Dullard
23rd Sep 2021 17:09

Subsection (3)'s my favourite.

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Replying to The Dullard:
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By Tax Dragon
23rd Sep 2021 18:02

That's the smaller shareholder's wife you're talking about.

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By Justin Bryant
24th Sep 2021 10:53

If you instruct one of the commentators above he'll tell you there's no CGT deemed MV problem here if the undervalue transfer is somehow justified to this particular shareholder compared to what a third party transferee would pay on arm's length terms.

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Replying to Justin Bryant:
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By The Dullard
24th Sep 2021 11:31

Don't be silly Justin. It's a gift, which specifically falls within s 17.

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