Retiring director's shares transfer

Retiring director's shares transfer

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In a small two director/shareholder (50/50) operation, one of the directors has reached the age of 64 and is retiring. He has already resigned directorship and now wants to gift his shares to the other director.
The company has only produced a modest income for the two (circa 30/35K each per year) and there is little in the way of fixed assets. The retiring director sees little in the way of ongoing value now that he is no longer working in the company, only a modest income for the remaining director.
There is no connection between the two other than they worked together until January this year. Thus not connected persons?
Would this be a simple transfer of shares or are there complications.?

Replies (6)

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By geoffmw
10th Mar 2011 17:09

Will the income now be

£60-70K? or still only £30-35K?

If the former there is a potential CGT liability but probably with entrepeneurial relief.

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By amwraith
10th Mar 2011 17:19

Income halved

Income will now be 30k or less as new employee wages replaces director's income

thank you

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By SE
10th Mar 2011 17:28

Retiring Director

What about a buy back of shares by the company?

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By geoffmw
10th Mar 2011 17:42

how would a buy back

work as a gift? therefore an innapropriate piece of advice.

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Nichola Ross Martin
By Nichola Ross Martin
10th Mar 2011 21:07

By gift to the other shareholder

I would be thinking about exemption from employment related securities on the family and friends heading perhaps. It is slightly unusual to give away valuable shares to an otherwise unconnected person. I would think about whether the shares are business assets for CGT/IHT, hard without any knowledge of the company. You might want to set out these in a letter to your client.

Company could alternatively exercise a buy-back for a nominal consideration - but difficult to see what value there would be here.

Check the articles, shareholder agreement etc.

It is insane that a transaction like this could become so complicated but, in this day and age and with the OTT tax penalty regime you should do some detailed guidance to cover yourself.

Virtual tax support for accountants:www.rossmartin.co.uk

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By blok
11th Mar 2011 09:10

.

Sometimes we got caught up in the detail and as a result get nothing done.  Its quite ridiculous.

There are no assets and I would not pay him anything for his shares so they are worthless.  Nobody is going to argue otherwise.

Transfer them to the other director and tell him to enjoy retirement.

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