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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 am about to receive 192k from an investment made a few years

Resolved Question:

I am about to receive 192k from an investment made a few years ago in a company that I worked the time. The investment cost be 25k
I am a higher rate tax payer and my wife is a standard rate payer.
What capital gains tax will I pay?
If I choose to re-invest part of the gain will I have to pay tax on this element of the gain?
Can I pass on some of the gain to my wife as a gift to lessen the tax burden?
Are there any costs I can legitimately offset to reduce the gain
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
.

Did you or do you still own shares in the company? How long ago did you cease to be an employee of the company?
Customer: replied 1 year ago.
No shares will be owned when the transaction is completed.
I stoppe being an employee just over 2 years ago
Expert:  TonyTax replied 1 year ago.

Thanks.

Leave this with me while I draft my answer.

Expert:  TonyTax replied 1 year ago.
again.

You stand to make a gain of £167,000 (£192,000 - £25,000). The first £11,000 will be exempt from CGT. If the shares were divided between you and your wife before their disposal, you would each get an £11,000 CGT exemption and you may benefit from less of the gain being taxed at 28% than would otherwise be the case depending on your respective income levels (see below).

As you are no longer an employee of the company, you cannot claim entrepreneurs' relief which would have limited any CGT charge to 10%. In any event, you would have needed to own at least 5% of the voting shares unless the shares were acquired through an Enterprise Management Incentive Scheme.

REINVESTMENT

There are few ways to defer a gain or wipe one out completely if the asset being sold is not a business asset I'm afraid.

You can defer a capital gain and get income tax relief by investing in an Enterprise Investment Scheme. You can read about EIS here and here. They are a high risk investment vehicle and really only suitable who can afford to lose all their investment.

You can also invest in a Seed Enterprise Investment Scheme, get 50% income tax relief and wipe out a capital gain forever. Read about SEIS here and here. This scheme has been extended to 5 April 2017. Again, this is a high risk investment vehicle, hence the generous tax reliefs.

CAPITAL GAINS TAX

There are two rates of CGT, 18% and 28%. The rate or combination of rates you will pay will be dependent on the sum total of your income and taxable capital gain in the tax year of disposal of the property. Assuming you sell the shares in the 2014/15 tax year, one of the following will apply:

1 If your income in 2014/15 including the taxable gain is £41,865 or less, then all the taxable gain will be taxed at 18%.

2 If your income in 2014/15 excluding the taxable gain is more than £41,865, then all the taxable gain will be taxed at 28%.

3 If your income in 2014,/15 excluding the taxable gain is less than £41,865 but more than £41,865 when you include the taxable gain then part of it will be taxed at 18% and part at 28%.

I hope this helps but let me know if you have any further questions.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15763
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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