CAT Liability and Potential CGT & IT Liability

J

Jim Davis

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Can anyone help me with the following scenario.

Say i inherited a 20% shareholding valued at 800,000 and a resulting CAT liability of €160,000 a few years ago. I took out a loan to repay this liability balance of which is now €142,000 and continued working in my full time job and had no active involvement in the company in which I inherited 20%.

I have been put on protective notice in my own job and may possibly be let go. Keep in mind I still have to make the repayments on my CAT loan and mortgage etc.

The directors of the company have come up with 2 suggestions to help me out.

  1. They loan me €150,000 interest free and I can defer the repayments for 5 years.
  2. The company buys back 15% of my shares @ market value which is considerably less than what they were worth when I was hit with my CAT liability
My questions are:

What is the potential tax cost for me and the company in the above scenarios?
Are there any practical considerations for each scenario?

Thanks in advance.
 
The two proposed measures seem oddly disparate.

My first suggestion would have been that if they wanted to help you out, they could appoint you a non-exec. director and pay you a small fee (OR if you do not want to be a director perhaps they might start to declare a dividend.)

All you really need is sufficient money to make the payments on your loans until you are back in gainful employment ( or am I missing something?). This could be a very temporary blip - I wouldn't be panicking yet.
 
If the pay me a salary I'm hit with Income tax @ 41% as is the same with a dividend. If I take the offer for 15% share purchase I have effectively paid €160,000 on an asset that I inherited which is now only worth the same amount as the CAT tax that I owe??
 
Who owns the other 80% ? A multitude of owners in which your 20% is the largest or one/two others in which your 20% is the smallest ?

Are the other owners related to you ? Have you been in receipt of dividends ? What is their history here re this ?
 
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