Capital Gain Tax Computation

amir

Hi All
I have a potential client who took out 10 percent shareholdings in a small limited company about three years ago. Now he wants to leave the company as other two shareholders will buy him out. He asked me to work out his capital gain (if any) on this transaction. on the face of it it is simply the difference between the price he paid when he joined and the price he will be paid now. is this correct or are there any other factors i should be taking into consideration? i have not seen company accounts for previous years. Can someone help please?

MarieNoelle

Hi @amir

A few issues to look out for, is the potential client connected to the other shareholders? How did he acquire the original shares in the first place (subscription, employment related securities?). Is he selling the shares at market value?
Also look into availability of entrepreneur's relief if he was working in the company.

(And don't reveal too much if he is just a potential client!)

amir

Hi @MarieNoelle thank you for your comment. he is not connected to other two share holders and he paid money to acquire his shareholding. the only thing i am not sure is about Market value. it is not a quoted company and i have not seen any accounts for the company so i think i just have to take things on their face value and make client aware of that.

davealucas

The market value of a share is the price agreed between two willing parties.

If the other two share holders have agreed a price with the client, then that is pretty much the market value.

amir

Thank you @davealucas