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Shares for employee

Shares for employee

Can someone please confirm my thoughts in relation to the following scenario:

A director owning 70% of the company wishes to reward his senior employee with a gift of 5% of the companys shares.  He is going to gift 5% of his own shareholding. If he does this then I assume that he will have to transfer at market value and be charged CGT.  Although he can claim gift relief the company has some investments that will mean that some of the gift will be chargeable.

Rather than gift outright, could the director provide the employee with an option agreement whereby he can purchase the 5% for, say £1 in 1 months time?  Does the £1 paid in relation to the option then become the sale price for CGT purposes?

In addition to this, could the director insert into the agreement that if the employee was to leave within say 3 years he can buy shares back for the price paid?

I appreciate that there will also be the ERS legislation to consider in relation to PAYE/NIC

Thanks for your thoughts.


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By blok
25th Jan 2012 23:05

This has 3 strands to it. Commercial, legal and then tax. Client needs to drive the commercial thoughts and discuss how options can legally be dealt with with help of commercial lawyer. Tax will be a factor but normally more of a consequence than a factor. Also depends on valuations.

If outright gift, then yes relief will be restricted for non businesses assets. Employees tax position will need to be considered.

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