We had recently assisted the client with a purchase of shares in a trading company that they worked for. The shares were acquired through a personal holding company, owned by our client and his wife.
The client’s objective was to gift portions of these shares to their children, and a key staff member.
We reviewed the structure and objectives in detail to determine the possible tax implications, with particular focus on the Employment Related Securities rules (as some of the people that would receive shares were current employees of the company), and the company distribution rules (as it was the clients holding company that owned the shares, not the client directly).
We determined that:
- The shares to be acquired by the key employee, should be a new issue of shares from the company.
- The shares to be acquired by the children should be a gift of shares.
- It would be better for the client and his wife to retain 100% ownership and control of the holding company.
By structuring the gifts of shares as advised we ensured that:
- There were no distributions of value from the company, that would be subject to income tax on the recipients i.e. the key employee, and the children.
- We were able to achieve the desired shareholdings for the children and employee without giving rise to lifetime inheritance tax charges on share transfers.
- The overall tax implications for the key employee were minimised.
- The client and his wife could continue to utilise the holding company for future tax planning purposes.