I have a client that is a 50:50 shareholder split between two brothers. Both brothers were also directors up until March this year when one resigned (his poor credit history was making it hard to secure finance).
The resigned director now intends to gift the resigned director's shares to the existing shareholder and director. I am comfortable with the hold over relief on the resigned director for CGT purposes but does this potential transaction have any potential impact on the remaining director from an income tax perspective. My thoughts led me to potential disguised remuneration?
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The company now intend to gift the resigned director's shares to the existing shareholder and director.
What were the circumstances under which the company acquired the resigned director's shares?
EDIT: OP has now clarified what he meant.
the company acquired the resigned director's shares
Ah, yes... that would answer my question! :-)
Apologies, I have made an important edit to the original post, the shares are still held by resigned director, not repurchased by the company
Has something already happened?
The company now intend to gift the resigned director's shares to the existing shareholder and director.
"The company"?
Plus, why, if the existing director already holds 100% consequent to whatever it was that's already happened?
But to answer the question, it's ERS (Part 7A) that you (may) need to consider.
You may be able to get into the family exemption under the ERS rules.
Holdover relief has to be claimed on the resigning Director’s tax return and a valuation included.