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Gift of shares to children over 18

A 100% shareholder/director wants to gift his 2 children 15% of the business each by issuing B shares enabling occasional dividends, what is the tax implication?

I assume since the 2 children are connected parties cgt will be chargeable in the market value of the shares if transferred out of the 100%, correct?

What if new B shares were created on top of the ordinary shares, who would be responsible for paying the tax for shares issued under market value?

Finally, with B shares, where should the dividend / voting rights be laid down to satisfy hmrc if challenged?

Thank you

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If the company is issuing fresh B ORD shares to the children I can't see any CGT implications. Give them cash gift (hope inheritance tax rules don't apply to you) to pay for the subscription.

As to dividend/voting rights etc first do make sure there is nothing restrictive in the Articles. Then write a board resolution, followed by issue documents (brief terms and conditions of the issue and may be an application form for the children to sign).

 

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Thank you for your comments......

What would the cost of the B shares be based on? Would it be the market value of the ordinary shares or something different?

Thanks again

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It should be based on market value.

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The CGT implications...

... are in S.29(2) TCGA 1992.

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If it's a trading company...

... holdover relief can be claimed.  I'm not sure if you could have it apply to a deemed disposal under S.29(2), but he could issue the B shares to himself initially, and then gift them to the children with holdover.  The IHT disposition is the same and is potentially exempt, if it isn't covered by BPR.

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