Jordi is a director and shareholder of Traiste Ltd. He has asked for your advice in connection with the forthcoming redundancy of an employee, the sale of shares in Traiste Ltd by his sister, Kat, and the payment implications for Traiste Ltd of alternative ways for Jordi to extract profits from the company.

Traiste Ltd:
– Is a UK resident unquoted trading company.
– Has two shareholders, Jordi and Kat, who each own 50% of the 1,000 £1 shares in issue.

Kat:
– Is resident and domiciled in the UK.
– Is 58 years old.
– Is a director and shareholder of Traiste Ltd.
– Will receive employment income of £34,000 from Traiste Ltd and dividends from other UK companies of £4,000 in the tax year 2017/18.
– Has already used her annual exempt amount for capital gains tax purposes for the tax year 2017/18.

Kat – proposed sale of shares:
– Kat subscribed for her 500 shares in Traiste Ltd at par on the incorporation of the company on 1 March 2013.
– She wishes to sell all of her shares before the end of 2017, and retire from the company.
– Kat’s brother, Jordi, has offered to buy these shares for £47 each. He is not prepared to sign any tax election in
relation to this offer.
– Alternatively, Traiste Ltd will buy these shares for their market value of £52 each.

Required:
(b) Explain, with reference to the after-tax proceeds in each case, why Kat should accept Jordi’s offer to buy her shares in Traiste Ltd, rather than sell her shares back to Traiste Ltd. (8 marks)