Allocation stock
Discussion
Right as no one can help with my EMI question how about this..
I own 50% of the company, my business partner owns 50%.
We turn over £400k with a profit of £120k (these are not real figures).
We owe very little but as a service company have very little in the way of assets.
In order to grow we have decided to take someone on at board level and would like to give him 10% of the company when he joins and a further 20% over the next three years.
What is the best way to do this minimising the tax burden?
TIA
D
I own 50% of the company, my business partner owns 50%.
We turn over £400k with a profit of £120k (these are not real figures).
We owe very little but as a service company have very little in the way of assets.
In order to grow we have decided to take someone on at board level and would like to give him 10% of the company when he joins and a further 20% over the next three years.
What is the best way to do this minimising the tax burden?
TIA
D
I think you'll have to run this past your accountant with real numbers in place.
You are probably on the right lines with an EMI but there are limits in place as to how much you can give using this method and the whole crux of the scheme is (was! I haven't looked into these schemes for about a year so it all could have changed since then!) based on a valuation of the business using Inland Revenue rules, which makes it a little more tricky to advice on this forum. The revenue used to offer a service where you could send them details of your business and they'd give you a valuation, details will be on their website if thats still available.
So I'm afraid I've probably not cleared anything up for you there!
Alan
You are probably on the right lines with an EMI but there are limits in place as to how much you can give using this method and the whole crux of the scheme is (was! I haven't looked into these schemes for about a year so it all could have changed since then!) based on a valuation of the business using Inland Revenue rules, which makes it a little more tricky to advice on this forum. The revenue used to offer a service where you could send them details of your business and they'd give you a valuation, details will be on their website if thats still available.
So I'm afraid I've probably not cleared anything up for you there!
Alan
This is a very specialised area of tax planning and something you would definitely want to discuss with your accountant. Allocation of shares to an "employee" would generally be a taxable event - either under Income Tax or Capital Gains Tax rules. There might even be National Insurance implications.
Also, any schemes drawn up with a view to minimising tax might now be looked on as a "Tax Avoidance Scheme" which would need prior approval by HM Customs and Revenue.
Also, any schemes drawn up with a view to minimising tax might now be looked on as a "Tax Avoidance Scheme" which would need prior approval by HM Customs and Revenue.
I know it's not the question, but are you absolutely sure it's wise to give equity on day one? What if it doesn't pan out the way you both hope it will, it could be quite tricky. Obviously it's your call, but before I'd start parting with huge chunks of equity (which is the family silver) I'd need some pretty serious convincing.
srebbe64 said:
I know it's not the question, but are you absolutely sure it's wise to give equity on day one? What if it doesn't pan out the way you both hope it will, it could be quite tricky. Obviously it's your call, but before I'd start parting with huge chunks of equity (which is the family silver) I'd need some pretty serious convincing.
I know, and I know and yes
Cheers
D
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