New queries, issue 4674

Transmission

Tax implications of a share conversion.

My client an elderly woman held 50 out of 350 £1 ordinary shares in a successful family business. They have been held a long time and the March 1982 value was only £3 000 for the holding.

In 2017-18 there was a share reorganisation. My client’s ordinary shares were cancelled and in their place she received one million £1 preference shares. These provide an assured income a preferential right on any winding-up and a right to vote in prescribed circumstances; they confer no rights of redemption. No consideration was involved in this transfer.

The ordinary shares were valued at £24 000 each (£1.2m for the holding) immediately before conversion. The preference shares were valued at £1m immediately after conversion.

I need assistance to grasp the capital gains tax and inheritance tax implications of what has happened. I...