We often see cases where employees have been given ‘B’ shares in the company.
Typically these shares carry no voting rights or capital rights, either when the company is sold or when it is wound up. They do, however, carry the rights to receive a dividend.
These shares can be subject to interest from HMRC as the lack of other rights suggests that they exist purely to allow employees to receive remuneration in a form that is not subject to income tax and national insurance contributions ‘NIC’.
As the taxation of dividends has changed the income tax differential is no longer as significant but the NIC saving remains, in particular employers NIC at a rate of 13.8%.
If you have issued this type of share to your employees you might want to consider how these can be amended to remove any further tax risk. There are a number of ideas that we can look at depending on the circumstances of your business.
For more information, please contact Lesley Sutton on 01484 550037 or email firstname.lastname@example.org.