The following Employment Tax guidance note Produced by Tolley in association with Ken Moody provides comprehensive and up to date tax information covering:
If a company (usually referred to as the target) is taken over, any employee or director holding options, awards or other rights over shares in that company will be concerned for their rights to be protected. Generally, the plan rules will give some fixed entitlements to participants and the acquirer of the company (the acquirer) may offer additional choices.
Common plan rules will allow participants in a share scheme the chance to acquire shares in the target to the extent that the rights have vested. Participants may then accept an offer, sell shares, receive cash / shares or a combination, or swap their options or share rights for ones in the acquirer. If participants do nothing, the rights usually lapse after a specified period, commonly less than six months, and all rights are lost.
The acquirer may offer a swap of options or share rights, pay participants to give up the rights, or offer participation in the acquirer’s plan.
Tax-advantaged plans have specific rules to enable continued qualifying status.
A takeover is usually where the target company becomes controlled by a person (acquirer), whereby another company or an individual or group of individuals together acquire more than 50% of the shares or voting rights in the target.
Frequently, plan rules refer to a ‘change of control’ rather than a takeover. Control is commonly defined by reference to ITA 2007, s 995, ITEPA 2003, s 719 or the old reference in ICTA 1988, s 840. These definitions are substantially the same and look at who can control the affairs of the company as a result of shareholding, voting power or any other powers, whether under the articles of the company, shareholder agreements or any other document.
Sometimes, the definition of control used is that given in CTA 2010, s 450 which is slightly different, see Simon’s Taxes A1.156.
Occasionally, plan rules will provide that the rights on a takeover
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
‘Bed and breakfasting’ was the pre-1998 practice of selling shares and repurchasing them the following day. This technique can still be used in a modified form to achieve capital gains tax (CGT) savings for current or future tax years using:•a spouse / civil partner•a self-invested pension plan
This guidance note explains the main scenarios where UK companies (other than financial institutions, etc) must withhold tax at source on payments of interest and how this is dealt with in practice.Obligation to withhold income tax from certain paymentsWhen UK companies, or partnerships of which a
This note provides details on how to calculate quarterly instalment payments (QIPs) for large and very large companies.The instalment amounts are based on the estimated corporation tax liability of the company’s current accounting period. Therefore, this means that large and very large companies
This guidance note considers the capital gains tax implications where shares are sold in exchange for new shares.The consideration paid by a purchasing company to the shareholder(s) for their shares in a target company could be in the form of either:•new shares in the purchasing company in exchange