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Ask an expert: Tax on partly paid shares


We act for a large private trading company where several members of the management team have been allotted partly paid shares. These are designed to provide an incentive for the individuals to participate in the equity on the ultimate sale of the company. The individuals satisfy the 5% requirements of nominal capital and voting capital to qualify for entrepreneurs’ relief. Each individual has significant unpaid capital of in excess of £100 000. What are the key tax issues on partly paid shares?


There are three main tax issues and potential pitfalls which we consider below. There is also of course a practical commercial issue in that the employee could be asked to pay up their capital if the company becomes insolvent. This risk is significant and typically the controlling...

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