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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am a UK tax payer and I am in the process of being given

Resolved Question:

I am a UK tax payer and I am in the process of being given some shares by a Swedish technology startup company that I am working with. I am not an employee of theirs.
The shares are worth around £650 in total. There is a restriction on the shares which means that if I want to sell them before 2018 I have to offer them back to the company for a set price (roughly £1,300 in today's money).
If things go to plan then the shares will be worth a lot more in 5 years time.
I want to make sure I pay the right tax here in the UK on being given these shares, but at the same time I do not want to overpay. What is the best way for me to deal with this?
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

Please clarify for me...

Are you being given the shares at no cost to you or is the cost to you £650?
You say there is a restriction on sale of these shares in open market before 2018. After this restricted period, would you free to sell the shares piecemeal?

Many thanks
Customer: replied 3 years ago.

Hi there. The intention from the Swedes is to give them at zero cost (they would like to get us more 'vested' in their startup) so the principle is to minimise the cost to us where taxes are concerned.

With regards ***** ***** the shares in the future, we would need to offer them to the fellow shareholders first (right of first refusal) and they would buy them at an internally negotiated fair market value. If the internal negotiations fail then we appoint an independent valuer such as a credible management accountancy firm.

Expert:  taxadvisor.uk replied 3 years ago.
Mitt, thank you for your reply and for additional information.

Basically, any gain arising from sale of shares would be chargeable to capital gains tax. You would claim gains allowance against the gain before CGT is calculated (gains allowance in current tax year is £11,000). CGT rate is 18%, 28% or a combination of both depending on your income including the gain in the year of sale.

Your question is -
If things go to plan then the shares will be worth a lot more in 5 years time. I want to make sure I pay the right tax here in the UK on being given these shares, but at the same time I do not want to overpay. What is the best way for me to deal with this?

Let's consider the scenario post 2018 as any sale prior to that is unlikely to generate a sizeable gain to worry about.

You say you would have to offer then to fellow shareholders before to others. The most tax efficient way to mitigate your CGT would be to sell your shares piecemeal to fellow shareholders each tax year to take advantage of your capital gains allowance spread over tax years.

The worst scenario is CGT at 28%.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 3 years ago.

Thank you for the information. I have a few more questions:

1. Does this apply even if the shares are from a privately held Swedish company?

2. Do I have to pay any tax today for receiving the shares, and if so, what is the best way to declare them.

3. How do things like 431 and 425 Elections play into this? I had a similar setup a few years ago with a UK company and signed a 431 election in order to take advantage of certain tax efficiencies but to be honest I can;t remember what they were.

4. Should the Swedish company be setting these up in a certain way, such as a formal share scheme as outlined on the gov.uk site, such as an EMI? Can they even do that?

Expert:  taxadvisor.uk replied 3 years ago.
Mitt, thank you for your prompt reply...

Capital gain from sale of stock and shares cover both private and public quoted companies.

You would pay CGT on sale of shares and not on acquisition of them.

Sec 431 election covers shares sold to employees.. you have stated you are not an employee of theirs.

I am not an expert on Swedish tax matters and could not advise you if Swedish Tax authorities have something similar to EMIs.

EMIs are tax advantaged share options. They are designed to help small, higher risk companies recruit and retain employees who have the skills to help them grow and succeed. They are also a way of rewarding employees for taking a risk by investing their time and skills to help small companies achieve their potential.

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 3 years ago.
I thank you for accepting my answer.

Best wishes.