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terminally ill client wants to retire and gift his shares to existing shareholder for the continuance of the company

terminally ill client wants to retire and gift...

I have a terminaly ill client who is a 50% shareholder in a company together with 1 other shareholder who owns the remaining 50% of the shares.

In order to secure the future of the company and because of his failing health, he wants to retire and gift his shares to the other shareholder and to become a consultant to the Company for whatever time remains to ensure a smooth transition for the existing clients of the company to a time when me client will no longer be with us and his colleague will be running the company on his own. 

Can anybody see any problems with business assets gift relief being claimed on the gift of shares or with my client becoming a consultant for his remaining time to assist with the transition of the company to the full control of the other shareholder.          

Obviously a difficult time and would appreciate any advice. 

Thank you 

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13th Oct 2010 12:28

will planning

There shouldn't be a problem with your client's idea, as it is a transaction between shareholders.

However I would suggest that the gift of the shares happens under your client's will. This should result in the surviving shareholder receiving the shares tax free at current market value (assuming that the shares qualify for BPR) rather than at your client's historic cost.

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13th Oct 2010 13:57

Thanks for your advice on this, however.......

I was concerned as to whether my client could retire and act as a consultant whilst still holding 50% of the shares of the Company? Could this be challengable as employment?   

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13th Oct 2010 15:34

Form 42?

Assuming both are also directors of the company you will probably need to report the transaction on Form 42.

Could you not do a company purchase of own shares? With CGT treatment and the likely availability of Entrepreneurs Relief the tax position might work out well and give the same desired position.

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