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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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There, I am due to sell shares in a company that I have

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Hi there,
I am due to sell shares in a company that I have been employed by for 4 years. The value of the shares is approx £375,000 and as part of the sale I will be resigning from the company. My plan is to set up my own company and separately to that, provide consultancy services a few days a week to my current employer.
I am trying to find ways of reducing my CGT bill and have currently found two potential opportunities.
Firstly, changing my employment status to Employee Shareholder to take advantage of the £50,000 tax free allowance.
Secondly, utilising the EIS / SEIS investment / reinvestment allowances.
I would like to know whether the above 2 schemes could work for me and if there is anything else that I could potentially use to lower my CGT bill.
Many thanks
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi. Can you tell me how you acquired the shares in your employer company please. On what basis will you be providing services to your current employer after you leave, on a self-employed basis, as a new employee?
Customer: replied 2 years ago.

Hi there,

It will be on a day rate - I intend to use a ltd company and invoice monthly. I will pay myself a small salary and the rest through dividends.

I was given them by my employer as an incentive. I did not pay anything towards them.

Does that help?

Thanks

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer. It will take a while so please bear with me.
Expert:  TonyTax replied 2 years ago.

Hi again.

£50,000 EMPLOYEE SHAREHOLDER SCHEME

The rules of the Employee Shareholder scheme are outlined here and here. I'm not aware that this can be applied retrospectively to existing shareholdings. In any event, you have to go though various hoops before you can accept ES status and I doubt that has happened even for the most recent share awards, ie since the ES rules were introduced. A certain amount of advance planning is involved.

EIS INCOME TAX RELIEF

The income tax rules for EIS investments are detailed here. The relief is a straight 30% of the investment (£1,000,000 pwer tax year) but the investor must have paid income tax of at least as much as the relief being claimed or it will be limited to the tax paid. The relief can be split between the tax year of investment and the previous tax year.

EIS CGT DEFERRAL


You can defer a gain by investing in shares through EIS. Read about that here. The gain deferred is not written off however. It is merely deferred until a later tax year, usually when the EIS shares are sold.

SEIS INCOME TAX RELIEF

You can claim income tax relief at 50% on an investment up to £100,000 annually through SEIS. Relief can be split between two tax years as with EIS income tax relief. Read about it here.

SEIS CGT RELIEF


You can claim relief for an SEIS investment which has qualified for income tax relief against capital gains. Unlike the EIS situation, the gain is not revived at a later date.

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

Customer: replied 2 years ago.

Thanks for your answer. I was already aware of most of the above but was looking for more detailed information, particularly on the shareholder status.

It would be good to find out for sure whether this can be done retrospectively.

Thanks

Expert:  TonyTax replied 2 years ago.
I'll try to dig out confirmation in black and white but you rarely find that. That fact that there are a series of procedures that you have to go though would lend credibility to that argument but I will see what I can find.
Customer: replied 2 years ago.

Cheers, ***** ***** reading correctly the procedures look like you must agree in writing and I must get independent legal advice and give 7 days' consideration, but that's about it I believe.

Thanks

Expert:  TonyTax replied 2 years ago.
The Employee Shareholder scheme is a pre-approved one and applies to shares issued on or after 6 April 2013. Most employee share schemes now operate on a self-certified basis whereby from 6 April 2014, the employer has to notfy HMRC of a scheme's existence before 6 July following the end of the tax year in which the first shares were awarded under that new scheme. If notifcation is given to HMRC after 6 July, then it will come into effect from the start of the tax year in which notification is given. Notification had to be made to HMRC by 6 April 2015 for schemes set up before 6 April 2014.
Customer: replied 2 years ago.

So in other words it's not possible to do it retrospectively?

Thanks,

Adam

Expert:  TonyTax replied 2 years ago.
That's correct. A scheme has to be registered with HMRC in line with the dates I gave.
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