Alphabet Shares: Opportunities & Risks - An Advanced Guide

Introduction

The use of multiple classes of shares - commonly known as alphabet shares - is widespread in the Owner-Managed Business (OMB) sector, particularly when businesses seek to distribute dividends at varying rates among shareholders. While this approach can offer flexibility, it also carries significant tax and legal considerations.

This new advanced level virtual classroom seminar builds upon foundational knowledge to provide comprehensive analysis of complex alphabet share structures, with particular focus on the settlements legislation and its interaction with share planning in family companies. Through detailed case law examination and practical scenarios, you will develop a sophisticated understanding of both the opportunities and risks inherent in these arrangements.

Presented by Nick Wright of Jerroms Miller, this is a practical and interactive session which will include extensive case studies, case law analysis, and roundtable discussions. It is ideal for experienced accountants, tax advisers, legal professionals, and business owners who regularly advise on or implement sophisticated ownership and remuneration strategies within OMBs.

What You Will Learn

This live and interactive session will cover the following:

• Setting Up Alphabet Shares
• Legal considerations
• CGT implications including share reorganisations and value shifting provisions
• Employment related securities issues
• HMRC reporting requirements
• Using Alphabet Shares to Incentivise Employees
• Dividends, earnings, and PA Holdings
• Employment-Related Securities - and the scope for a Chapter 3B charge
• Using alphabet shares to create growth share arrangements
• Structuring growth shares to incentivise key employees
• Valuation considerations and establishing base value
• Avoiding ERS charges on growth share implementation
• EMI schemes vs. growth shares - comparative analysis
• Case studies - successful growth share implementations
• Dividend Planning with Alphabet Shares in the Family Company
• Comprehensive overview of ITTOIA 2005 Part 5 Chapter 5 (settlements legislation)
• Definition of ‘settlement’ and ‘settlor’
• When does a gift of shares constitute a settlement?
• The concept of ‘element of bounty’ and gratuitous transfers
• Retained interest and reservation of benefit principles
• Analysis of when dividend income is caught by the settlements provisions
• The ‘wholly or substantially a right to income’ test (s.624)
• Outright gifts vs. settlements - distinguishing features
• Spousal transfers and civil partnerships - the exemption under s.626
• Minor children provisions under s.629
• Family Investment Companies (FICs)
• Role of alphabet shares in FIC structures
• Designing share classes for different family members
• Income vs. capital rights - allocating returns appropriately
• Voting and control considerations across generations
• Loan vs. equity funding for FICs
• Interaction with settlements legislation in FIC context
• Estate Planning and IHT Mitigation
• Using alphabet shares for succession planning
• Structuring for Business Property Relief (BPR) optimisation
• Impact of recent BPR changes and restrictions
• Freezing value for older generation shareholders
• Creating growth opportunities for next generation
• Gifts with reservation of benefit considerations
• Interaction with settlements legislation in estate planning

Recording of live sessions: Soon after the Learn Live session has taken place you will be able to go back and access the recording - should you wish to revisit the material discussed.