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Capital Gains Tax

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  • 18 posts
  • # 119908

Hi, 

My husband started a company with an invention of his some years ago.

He was forced out the company when they got some VC's in but he was given a number of shares as part of his redundancy.

A couple of weeks ago he was told the company had been sold and he was sent a relatively large amount of money. (Well to us it is).

I am trying to find out when he has to pay and how much.  The uk gov sites are not overly helpful.  

We have also moved to Scotland so I don't know if it is different. 

Any help would be appreciated. 

 

TIA

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  • # 119911

Hi, it's very difficult to fully understand what happened. You say that he was given a number of shares as part of his redundancy, but if he was the person who started the company, surely he owned some shares already? Isn't it more the case that his % interest in the company changed when they got some VCs in (and his original interest got diluted)? 

And this money that was received, is this on the disposal of the shares? If your husband disposed of the shares without actually actively selling them, is this because the majority shareholder could force a minority shareholder to sell their shares? Is the payment received the full proceeds for the complete disposal of his shares?

If the cash received are the only proceeds (what I mean is that the sale of the company did not also include for example a share for share exchange) and your husband has now completely disposed of the shares, then you need to work out the capital gain by deducting the base cost of the shares from the proceeds of the sale.

The base cost of the shares will be what your husband paid for the shares (if anything) plus anything that was charged to income tax when the shares were acquired. If the shares were awarded upon the termination of your husband's employment as you say, I don't think it could have been a voluntary 'ex gratia" payment and so the market value of the shares awarded would have been subject to income tax. This amount will then be the base cost of the shares. (Although I am not actually sure if this really is the way the shares were acquired, there could be a misunderstanding here.) 

 

Then if your husband did not make any other capital disposals in the tax year, the amount of cgt is calculated by deducting the annual exempt amount from the gain and this will then be subject to tax at 10% or 20% depending on how much there is left of the basic rate band.

 

Business Asset Disposal Relief won't be available as your husband is no longer working for the company.

 

The Scottish taxes only apply to non-savings income and so the CGT will be the same in Scotland.

 

The disposal can be reported via a 'real-time transaction tax return' (through an online Government Gateway account) or via his self-assessment tax return and then the tax is due by 31st January following the end of the tax year. 

 

 You need to make sure that the money received really is the cash-only proceeds for the disposal of the shares and that you work out the base cost correctly, but I can't help you any further without more information.

 

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