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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4983
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I recently sold my half (50%) shares in a limited company I

Customer Question

I recently sold my half (50%) shares in a limited company I set up with a partner.
The shares were sold for £50,000.
However over the course of the business my father put £42,000 into the business.
Therefore I have now repaid that.
This was done informally so there is no records, apart from the sale of the shares at £50,000.
What does this means in terms of potential capital gains?
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
The original shares cost £1 each.
Customer: replied 1 year ago.
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Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your question..The sale of your shares has given rise to a chargeable gain for CGT purposes.As far as it relates to monies advanced by your father into the business, this was in informal arrangement (loan to you and it has now been repaid).Your gain is £49,999.Based on what you have stated, You would be entitled to Entrepreneurs' Relief on the gain made and your gain would be taxed at 10% instead of the normal rate of 18%, 28% or a combination of bothe.You get your gains allowance of £11,100 and the balance would attract CGT at 10%Your CGT payable will be (49,999-11,100) £38,899 at 10% = £3,889More information on entrepreneurs' relief can be found herehttps://www.gov.uk/entrepreneurs-relief/eligibility 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.
Expert:  taxadvisor.uk replied 1 year ago.
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Customer: replied 1 year ago.
Thanks. The money (£42,000) was paid by my father to me, which I then transferred into the business. What proof (if any) do I need to provide of this, or do I just provide the figures on my tax return?
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply.You don't have to disclose the loan from your father or the repayment of loan to him in your tax return. It is personal matter and it is not reported. I hope this is helpful and answers your question.
Customer: replied 1 year ago.
So, I simply report the CGT figure on the return?One other question: I also had a Directors Loan that was owed to me repaid. I assume that doesn't attract tax.
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply.You simply report the capital gain on the tax return.Repayment of director's loan does not attract tax and does not get reported on the tax return. I hope this is helpful.
taxadvisor.uk and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Great, thanks.
Customer: replied 1 year ago.
Sorry, one more question - what qualifies me for Entrepreneurs Relief?
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply..What qualifies you for Entrepreneurs' Relief- you are a office holder of the company (director)- the company's main activity is trading- you have at least 5% of shares in the company. many thanks
Customer: replied 1 year ago.
Thanks, ***** *****
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your good words.
Customer: replied 1 year ago.
No problem.Does it matter that I resigned as a Director in 2013?I retained my shares but was not a director?
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply.You should be an employee of the company for at least the past 12 months at the time of sale.You resigned in 2013.. this would mean you don't meet all conditions for entrepreneurs' relief.Look at "Disposal of shares in or securities of your personal company" herehttps://www.gov.uk/government/publications/entrepreneurs-relief-hs275-self-assessment-helpsheet/hs275-entrepreneurs-relief-2015 I hope this is helpful.
Customer: replied 1 year ago.
Does that mean I can't claim Entrepreneurs Relief?If so, what will the CGT be in that instance.I will probably earn about £30,000 in the current tax year.
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply.In the absence of entrepreneurs' relief available your CGT is likely to beIncome after personal allowance (30,000-10,600) £19,400Capital gains after gains allowance £38,899CGT at lower rate (31,785-19,400) 12,385 x 18% = £2,229.30CGT at higher rate (38,899-12,385) 26,514 x 28% = £7,423.92Total CGT payable (2,229+7,424) £9,653 I hope this is helpful.
Customer: replied 1 year ago.
Thanks - any ways around this?
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your employeeYou are not complying with one of the qualifications.. ie being in employment in that company in the last year of sale.You have to meet all three requirements, I'm afraid.Many thanks