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Where Taxpayers and Advisers Meet

SHARE CAPITAL REDUCTION WITH DIFFERENT CLASSES OF SHARES

skc
Posts: 2
Joined: Tue Sep 18, 2018 5:42 pm

SHARE CAPITAL REDUCTION WITH DIFFERENT CLASSES OF SHARES

Postby skc » Tue Sep 18, 2018 5:50 pm

Father owns 100 A ordinary £1 shares and 50 B ordinary £1shares.
Son owns 50 B ordinary £1shares.
A and B shares have the same rights.
There is no share premium account and the company value is approx £500k.
The company wants to reduce its share capital by redeeming the A shares at par ie £100. Father and son both happy with this.
After the reduction father and son would own 50 B ordinary £1shares each.
The effect is that father owned 75% of the issued shares before the capital reduction and will own 50% after.
If there a tax consequence for the son as in effect the value of his B shares have just increased significantly?

SteLacca
Posts: 426
Joined: Fri Aug 07, 2015 2:17 pm

Re: SHARE CAPITAL REDUCTION WITH DIFFERENT CLASSES OF SHARES

Postby SteLacca » Thu Sep 20, 2018 10:17 am

Only on disposal for capital gains tax purposes, since his gain will be that much higher.

skc
Posts: 2
Joined: Tue Sep 18, 2018 5:42 pm

Re: SHARE CAPITAL REDUCTION WITH DIFFERENT CLASSES OF SHARES

Postby skc » Fri Sep 21, 2018 9:31 am

Thank you
I forgot to mention that this isn't a trading company.
Is there any tax consequence for father havibg only received par for the share capital reduction when the value would be greater?


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