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PAYE implications of an employee shareholder arrangement.
A father and son each owns 50% of the shares in their company. They are both directors of this engineering business. The annual net profit is £100 000.
Each would like to give a 3% share to an employee. Despite my reservations they have now instructed a solicitor to draft a shareholders’ agreement under which the employee would transfer back the shares to the directors should he leave.
At this stage I am not too concerned about the directors’ capital gains tax because any gain will be covered by their annual exemption. But I am concerned about the PAYE implications.
Can anyone advise on this?
Query 19 154– Outsider.
Reply by Sue Wilson and Elizabeth Bowdler PwC
Perhaps we should start by saying that we are assuming that everything set out in the question relates to UK companies and UK resident taxpayers.
Even though the shares...
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