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Guidance on CGT treatment of employee shareholder shares

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HMRC has updated its guidance on employee shareholder shares to reflect the Budget 2016 announcement introducing a £100,000 lifetime limit on the CGT exemption available for disposals of employee shareholder shares acquired under agreements entered into after 16 March 2016. The changes are contained in clause 77 of the Finance Bill 2016. For agreements made on or before 16 March, the £50,000 exemption available under each agreement with unconnected employers is not subject to an overall lifetime limit. The rules are also modified in relation to shares transferred to a spouse/civil partner, or exchanged for other shares in a company reorganisation.

Where employee shareholder shares acquired after 16 March 2016 are transferred to a spouse/civil partner:

·       if market value would give rise to a gain which is less than the lifetime limit available to the transferor spouse, the transfer is deemed to take place at an amount equal to the market value;

·       if market value would give rise to a gain which is more than the lifetime limit available to the transferor spouse, the transfer is deemed to take place at an amount which gives rise to a gain equal to the amount of available lifetime limit; and

·       if the transferor spouse has used up their entire lifetime limit, the transfer is deemed to take place at an amount which would give rise to neither a gain nor a loss.

Where employee shareholder shares acquired after 16 March 2016 are exchanged for other shares in a company reorganisation:

·       if market value would give rise to a gain which is more than the available lifetime limit, the transfer is deemed to take place at an amount that gives rise to a gain equal to the available lifetime limit;

·       if market value would give rise to a gain which is less than the available lifetime limit, the transfer is deemed to take place at market value;

·       where the shareholder has none of their lifetime limit available, the disposal is deemed to be at a value that would give rise to neither a gain nor a loss; and

·       if the disposal would give rise to a loss, the deemed transfer value is that value which would give rise to neither a gain nor a loss.

See www.bit.ly/1WDis0l.

Issue: 1309
Categories: News
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