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bigduckontax
bigduckontax, Accountant
Category: Tax
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I'm currently self employed in the UK - making around £48,000 profit per annum. I

Customer Question

I'm currently self employed in the UK - making around £48,000 profit per annum.
I've been offered shares in a profitable LTD company in Hong Kong.
What would be the tax implications be to me in the following scenarios:
a) If shares were issued after targets are met each year
b) If all shares were issues at once (20% total) and then given back if targets not met.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Before I can respond there is one matter which needs consideration, are these distributions of shares being taken in lieu of dividends? I need to know this before I can respond.
Customer: replied 1 year ago.
No - not in lieu of dividends.
Expert:  bigduckontax replied 1 year ago.
Then this comprises an issue of shares to absorb surplus capital so no tax is due on issue. Taxation will occur on disposal through the Capital Gains Tax (CGT) regime. As you are paying nothing for the shares then the net receipt, sale less cost of sale, will be exposed top CGT. The position is not entirely clear, but it would appear that the HK Government may insist on a 20% tax deduction to be made from such distributions. This tax with held could be used to offset taxation on gains made on the shares at a later date and, under the Double Taxation Treaty between HK and the UK would be allowed as a tax credit against any UK CGT liability. The treaty is framed to preclude such gains from being taxed in both jurisdictions. I do hope that my reply has been of assistance.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3371
Experience: FCCA FCMA CGMA ACIS
bigduckontax and 2 other Tax Specialists are ready to help you
Customer: replied 1 year ago.
So would a) or b) be the better option?
Expert:  bigduckontax replied 1 year ago.
I don't think it makes a ha'porth of difference. Whichever is convenient for you, but I would suggest that the 'a' option is preferable and more certain.
Thank you for your support.

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