Sell Shares to avoid tax

Familyman01

Hello all,

The company I work for is selling some divisions.

I have 16k shares, worth £52k at todays share price (£3.3).

The sales process means the company will be returning £2.8 per share, by way of a dividend or tender offer in March (I have no further information beyond that statement).

If this is a dividend, I am very keen to avoid as much of that tax as I can (legitimacy). 

The average value per share I acquired them is below £3.3, so I am thinking of selling them as soon as I can before the dividend is paid, therefore paying no CGT in place of a hefty slice of dividend tax. 

Is this a sensible thing to do? All thoughts are welcome. Some other factors:

- I am an additional rate tax payer
- My wife is a basic rate tax payer
- We both have not used any ISA allowance this year
- Share price once the transaction happens and money is distributed is likely to be 80p
- Others way more shares may get the same idea, perhaps suppressing the share price, but I am assuming the distribution puts a 'floor' under it


Some other idea I had:

- Gift £20k to my wife into her ISA
- Sell and buy back inside my ISA £20k
- Gift some to kids ISA

All the above is public information, but company not names for obvious reasons. 

Thanks in advance for any help.

Jeremy535897

Did you acquire your shares by reason of your employment, and if so, were they acquired under some sort of approved plan?

Familyman01

Jeremy535897 said:

Did you acquire your shares by reason of your employment, and if so, were they acquired under some sort of approved plan?

Granted by employer, but I paid tax and NI in full on them though payroll (company sold half and used the proceeds to pat the tax & NI).

TheAble

If you sell them at £3.30 will your gains be fully absorbed by your CGT allowance?

Jeremy535897

I would suspect then that your capital gains tax base cost is the market value at the date you received them?

There is nothing in the tax legislation that would deem any part of the sale proceeds of straightforward ordinary shares in a company to be income, just because the company intends to buy back its shares in the near future. There are complex anti-avoidance rules in chapter 1 part 13 Income Tax Act 2007 (tax avoidance and transactions in securities), however, and without knowing all the facts, and how influential your shareholding is, it is impossible to be categoric.

Assuming that the capital gain will exceed £12,300 (assuming you have the full annual exemption available), there may be merits in transferring some of the shares to your wife before the sale. Your tax rate is likely to be 20%, as I assume that BADR will not apply:
https://www.gov.uk/government/publications/entrepreneurs-relief-hs275-self-assessment-helpsheet/hs275-business-asset-disposal-relief-2021

Familyman01

Jeremy535897 said:

I would suspect then that your capital gains tax base cost is the market value at the date you received them?

There is nothing in the tax legislation that would deem any part of the sale proceeds of straightforward ordinary shares in a company to be income, just because the company intends to buy back its shares in the near future. There are complex anti-avoidance rules in chapter 1 part 13 Income Tax Act 2007 (tax avoidance and transactions in securities), however, and without knowing all the facts, and how influential your shareholding is, it is impossible to be categoric.

Assuming that the capital gain will exceed £12,300 (assuming you have the full annual exemption available), there may be merits in transferring some of the shares to your wife before the sale. Your tax rate is likely to be 20%, as I assume that BADR will not apply:
https://www.gov.uk/government/publications/entrepreneurs-relief-hs275-self-assessment-helpsheet/hs275-business-asset-disposal-relief-2021

Thanks for that. Yes I am calculating the capital gain base as the average vale on the days they were issued (share price on that day), when I do this the value is below £3.30 (this is because most of them were granted when the share price was much higher).

This why I am hoping there is no CGT due.

My share holding is not significant at all - but I will check the chapter you highlight, thanks.

If I do the above, surly there would be no CGT tax to pay (as the sell price is below the price when I was granted them). so is there any point transferring them to my wife?

TheAble said:

If you sell them at £3.30 will your gains be fully absorbed by your CGT allowance?

I am hoping there is no CGT as it is actually a 'loss'.

TheAble

Possibly it's just how you're wording it, but if you acquired at an average price per share of less than £3.30 (£2.90 say) and you sell at £3.30 then you're making a gain (40p per share in my example). Maybe that's not what you mean though?

Familyman01

TheAble said:

Possibly it's just how you're wording it, but if you acquired at an average price per share of less than £3.30 (£2.90 say) and you sell at £3.30 then you're making a gain (40p per share in my example). Maybe that's not what you mean though?

Sorry! Yes I worded it the wrong way round in my original post - they were worth an average of £3.80 when they were granted, and now worth less. I made that very confusing.....!