Additional Tax payable when becoming a director

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gboy

Free Member
Nov 9, 2012
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  • #1
    Hello,

    I am in the process of officially becoming a director of a company that I work in and coincidentally co-founded in 2010 (I was not in a position to become a director for financial reasons at the time). As part of this change I will obtain voting rights as my share will be increased to 5%. Early in the company set-up an EMI scheme was put in place for key employees. As part of the current restructuring I have been advised that, by becoming a director with voting rights (e.g. 5%) that this will be subject to a "Tax Event" or I will need to pay some amount of Capital Gains tax.

    My question is does this sound right and what might this look like in tax terms? I just want to ensure I am in possession of relevant facts to ensure I am fully protected

    Regards
    Chris
     
    M

    Mitchells Bristol

    Free Member
    Nov 24, 2011
    1,382
    386
    Bristol
  • #3
    Hello there

    Just to establish the full facts - as an employee you were granted an EMI option over a percentage of the shares in the company (less than 5% - say 3% for this example). Presumably you have exercised this option so at that stage you own 3% of the company shares.

    You were subsequently made director and your shareholding was increased to 5% - so how was the additional 2% of the shares awarded to you? Was this a further EMI option, or an unapproved share option, an outright gift of shares or did you buy these additional shares?

    If these were an outright gift then it would almost certainly give rise to a tax event - liable to income tax (and maybe NIC).

    I can't see any cirsumstances where the situation you have described would give rise to a capital gains tax liability.

    If you could confirm precisely how the shareholdings have been acquired someone should be able to give some accurate pointers on this.
     
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