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Category: Tax
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Im selling my shares back to my company, as Im leaving the

Resolved Question:

I'm selling my shares back to my company, as I'm leaving the company, at a nominal rate (£1) to allow them to raise additional capital. The wording of agreement concerns me as I don't really understand my potential liability. Could you please help?

6.1 The Seller shall be responsible for paying all Tax (other than stamp duty or stamp duty reserve tax) arising from or in connection with the purchase by the Company of the Sale Shares from the Seller. The Seller irrevocably agrees to pay to the Company on demand the amount of any Tax that the Company is liable to pay (other than stamp duty or stamp duty reserve tax) or to account for (or that the Company reasonably believes it is liable to pay or to account for) arising from or in connection with the purchase by the Company of the Sale Shares from the Seller, including any income tax and primary class 1 (employee) National Insurance contributions that the Company is liable to account for and any secondary class 1 (employer) national insurance contributions that the Company is liable to pay and that may be lawfully recovered from the Seller;

6.2 The Company may set off any liability of the Seller under clause 6.1 against the Consideration.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi

Thanks for your question

Its basically telling you that you are responsible for any tax that arises on any gains you make on the selling of these shares - (which is correct)

Could you advise whether these shares were bought by you or allocated as part of a share scheme - and how much they would be worth now in total, if you sold for £1 a share

Thanks

Sam
Customer: replied 2 years ago.

Hi Sam,


 


Thanks for the prompt response appreciated. I was a founder of the company therefore the shares were allocated. I'm also retaining a 5% share in the company, following this sale. I


 

Customer: replied 2 years ago.

Sorry on the value, I believe they have a nominal value of £0.001

Expert:  Sam replied 2 years ago.
Hi Kevin

Thanks for your response

Then the amount paid out will either be paid via PAYE so subject to the appropriate tax and National Insurance - but if you were also a director of the company - then it might be paid out as a gross payment to you, and then you have the consideration of whether this is liable to capital gains.

If capital gains do apply then any amount of the payment in excess of £11,000 will be subject to capital gains tax.

But I would ask the company there position of the taxation of this (whether PAYE or Capital gains - I suspect it will be PAYE) and then you will be taxed through the payroll system -

I can give you a rough idea of either calculation if you can advise
1) Your pay so far to date and whether you have further pay due - so I can establish your total PAYE income to date - (and of course any other income of company benefits you might have)
20 The amount this sale of the shares will generate

I can then advise further

Thanks

Sam
Customer: replied 2 years ago.

Thanks Sam.

 

Perhaps I need to send you all of the paperwork to review. How much would that cost Sam because I can see this may open up a can of worms?

 

I've not taken a salary out of the company during my employment period. My income to date, has been based on my own personal savings, plus some pensions, where tax is deducted at source.

 

I'm basically signing over my shares at a nominal rate to allow them to raise additional capital, which has not been raised yet. This way protecting my remaining investment (5%).

 

I'm signing a compromise agreement as part of my leaving the company, which covers the historical monies owed in respect of my salary and other expenses. This is separate to the share sale.

 

I've already had a law firm review the compromise agreement, therefore have that covered. It's the tax aspect of the share sale I'm concerned about and just wish to ensure I get this right.

Expert:  Sam replied 2 years ago.
Hi Kevin

Thanks for your response

I am afraid we are not permitted to take on one to one wok outside of the Just Answer forum - as part of out agreement of working for Just Answer.

And salary is liable to tax the date it is paid, rather than from when it is due, and the same would apply to any payment you received on the share sale.

But I would assume you have an idea of what you are seeking from the compromise agreement and the share sale, so I will give you the scenario for both.

If the share sale is paid through as salary (which I suspect it will be) then for 2014/2014 under PAYE tax
If your total income is less than £150,000 then
The first £10,000 is tax free
The next £31865 is subject to 20%
From £31866 to £150,000 at 40%

If your total annual income is in excess of £150,000 then
The first £31865 is subject to 20% tax (No personal allowances)
the next £31866 to £150,000 at 40%
Anything in excess of £150,000 is charged at 45%


If the share sale is subjected to capital gains - which I advise is highly unlikely - then
The first £11,000 of the payout is tax free
Then any amount over and above this threshold is liable to capital gains tax.

If you annual income is in excess of £42475 - then this excess amount is liable to 28% tax - if your annual income is less than £42475 then some of it (the equal amount that represents your income between £9440 and £42475 is liable to 18% and any remaining amount at 28%

But as soon as you get the compromise agreement paid out and the share sale, alert HMRC - as its imperative that the years income position is fully reviewed, and they will ask for a completion of a self assessment tax return (it may well be that you already complete one each year) so the full income position can be reviewed.

But if you need any assistance with the self assessment, do come back to Just Answer, and if you would prefer to ask for me Sam Tax, the other experts will leave any question for me (just state in your opening post, that the question is for me)

Let me know if you have any follow up questions

Thanks

Sam





Sam, Accountant
Category: Tax
Satisfied Customers: 13775
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
Sam and other Tax Specialists are ready to help you
Expert:  Sam replied 2 years ago.
Hi Kevin

let me know if you wish me to make any calculations for you regarding this matter.

Thanks

Sam

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