Tax implications of issuing new shares to employee

Company wants to issue non directors new shares in company to retain key person

Didn't find your answer?

Hi all, 

Please could someone help me understand the tax implications of the following on both the individual and a company? A non director employee, many years service, has been offered the gift of a 10% shareholding in a trading company. This is primarily to retain services of the individual into the future and incentivise ongoing company development. It is likely this person would be made a director upon taking the shares. The would be no implication on control as existing majority shareholder would retain that majority even if all other shareholders clubbed together. I would assume the shares would be worth sub £75,000 allowing for some discount on the valuation given it would be a minority holding. 

If the company were to issue new shares as a gift, possibly a different class to allow dividends outside the existing share class, what would the tax implications be to the company and individual? Assume we ignore employee incentive schemes available.

Thank you

Replies (3)

Please login or register to join the discussion.

avatar
By chicken farmer
11th Mar 2018 13:34

As is often the case, the answer is 'go and speak to your advisers'.

But, in passing, you might just ask the employee if he really wants a minority shareholding in a (presumably) unquoted company. Maybe he'd like a big amount of cash instead.

Thanks (0)
Replying to chicken farmer:
By Ruddles
11th Mar 2018 13:59

He may well prefer a large amount of cash - who wouldn’t - but that would not really meet the objective of incentivising and retaining the employee. Unless said cash sum were payable in the future and subject to performance targets etc.

Thanks (0)
By Ruddles
11th Mar 2018 14:00

You (OP) should also be aware that a company cannot ‘gift’ new shares.

Thanks (1)