Shares and Capital gains tax - please help

TotallyBroke

I have kindly been pointed to post this in this particular sub forum in the hope that someone can advise.

I work for a company that is being bought. Now although this doesn't directly affect me it is worrying a few people that work with me.

General gist of what is happening/happened....

A company (A) decided they wanted to buy (B) the company I work for. At an amount that undervalued the company, according to the Board of Directors. From the moment this happened the Board told everyone not to sell their shares and to reject the offer. Company (A) kept moving the goalposts and the dates kept getting further apart. Firstly they wanted to have 90% of shareholders agree to the take over and this was supposed to have been decided by end of September.
The Monopolies got involved and decided that the takeover could happen but certain parts of the business would have to be sold so that company (A) didn't have the monopoly in that particular field of expertise. This was agreed and company (A) set a deadline date of tomorrow and decided they only needed 75% of shareholders to agree. (At this time they already had 61%)

On Friday the Board told us to still reject the offer company (A) were offering.
Now this morning we have come in to a notice from the board telling us to accept the offer!!!
Getting to the point is that company (A) want to give the shareholders a part cash part share deal.
For every 1 share of company (B) they will give you £1.73 and 0.1883 of a company (A) share. Now what is worrying is that we have been told it is very unlikely anyone will get 100% cash or 100% company (A) shares for their company (B) shares. So for people who have an awful lot of company (B) shares they will have to pay Capital gains tax on this.

In laymans terms is there anything that these people can do so that they do not lose an awful lot of money. Thanks

jimmo

This is not meant to be as rude as it probably sounds but if this doesn’t affect you directly then the best thing for you to do is keep your nose out.
There have been all sorts of employee share schemes over the years involving different tax reliefs and charges and the way in which the Capital Gains are calculated significantly depends on how the employees paid for their shares and whether they paid tax for the privilege of getting them cheap.
Without any real details my guess is that most people involved will probably have to pay a lot less tax than they probably fear but at this stage the best source of advice is probably your current employer who knows what share schemes have been used and the tax consequences.
However, to be blunt, if you are a layman, and not personally involved, then the chances of you being able to answer the questions we would have to ask to get to the bottom of this are fairly remote.
On a more technical note, the situation you are describing is a share re-organisation involving a part-disposal. The offer is on the table. Those involved will get a certain amount of cash and a certain number of shares. There doesn’t seem to be an option to take all cash or all shares so the only choice is to accept and face a tax bill on the cash or reject.

TotallyBroke

Thank you for your reply and I didn't think it was rude.

I agree I can't answer the questions needed and wouldn't want to know everyones personal monies.

I do know one person has an awful lot of shares. She is worried that if that equates to £10,000 in cash then she will have to pay £1,800 in tax to the tax man. She believes that capital gains is taxed at 18%. Some of these shares she did buy through share save but others she bought independantly.

I have read her your reply this morning and she is now making an arrangement to speak to a financial advisor.

I thank you again for replying

jimmo

I really don’t think she needs a financial adviser.
Now while there may be all sorts of pitfalls and complexities in calculating the chargeable capital gain the one certainty is that if she receives £10,000 in cash her capital gain cannot be any more than £10,000.
Assuming these shares are going to be her only disposal in the year she will have her Capital Gains Exempt amount which is £9,600.
That only leaves £400 chargeable to tax.
At 18% the tax due will be £72.00.
Actually she is probably entitled to Entrepreneurs Relief which will mean that her charge will be 10%, not 18% and the tax due will be £40.00.
She does have to declare her gains but in practical terms she should consider herself unlucky if HMRC bother to assess for £40.00 or even £72.00 if she is not already in Self Assessment. It will cost them more to raise the assessment than the tax due.