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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I own a third of the shares in a family limited company. When

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I own a third of the shares in a family limited company. When my mother died in 2004 my two brothers and I inherited her fifth share and then on my father's death we inherited our fathers one fifth share. My brother has now offered to buy my other brother and I out paying us a one third each of the current valuation. I appreciate that I will have to pay capital gains tax but will this be on the whole amount I receive or are there any allowances? Additionally I am assuming that as soon as our shares are transferred to my brother then he can liquidate the company whenever he wants.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Do you work for the family company as an employee or are you an officer or director of the company? How long have you owned the shares you inherited from your father? Do you own any other shares that you did not inherit? What is the company's business?
Customer: replied 2 years ago.

I am a director and am also paid a yearly salary of £7500 as are both my brothers I inherited the shares from my father in 2008 I have owned one fifth of the shares in the company since it began as a company back in the sixties or seventies. The company is property.

Expert:  TonyTax replied 2 years ago.
You say the company's business is property. Can you expand on that a little please.
Customer: replied 2 years ago.

We own various freeholds

Expert:  TonyTax replied 2 years ago.
Thanks.

Is that residential or commercial property? Do you provide any services to the tenants, particularly of any commercial property?
Customer: replied 2 years ago.

They are mixed freeholds shops on ground floor and residential above No services are provided Why is this information needed? All I want is a basic answer to my question

Expert:  TonyTax replied 2 years ago.
I do things properly so if you want a full accurate answer, I need to know the facts as you will soon learn. I'm drafting my answer now.
Customer: replied 2 years ago.

Ok

Expert:  TonyTax replied 2 years ago.
Hi again.

Any shares in the company that you owned prior to 31 March 1982 should be re-valued as at 31 March 1982 though I realise that will be difficult. Any increase in the value of your shares between the date of acquisition and 31 March 1982 is tax free. So, the 31 March 1982 value of the shares you owned at that date becomes your cost for CGT purposes. The shares you inherited from your parents will have a base cost equal to their value at the time you inherited them.

The reason I asked you about the nature of the business is due to the fact that where a company's business is property based, ie investment property as opposed to property development, the owner of the shares will not qualify for entrepreneur's relief when they sell their shares. If you had qualified for that relief, any CGT liability would have been limited to a rate of 10% as opposed to 18%, 28% or a combination of the two rates depending on the level of your income. You can read about entrepreneur's relief here.

The only relief that you will be entitled to based on the information you have provided will be an exemption form CGT for the first £11,000 of the gain you make from selling the shares to your brother.

When you brother owns the company outright, he is free to do whatever he wants with it so long as its debts are settled and there are no outstanding legal actions, for example, or anybody who may object to the company assets being liquidated and the proceeds withdrawn.

I hope this helps but let me know if you have any further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15840
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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