Director Share Transfer Form 42

Director Share Transfer Form 42

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Due to severe ill health director 1 gifted his 50% of the company shares to director 2 leaving director 2 owning 100% of the company shares.

A few months after the gift director 1 sadly died. Given the circumstances is the completion of a form 42 necessary as the gift was due to the personal relationship of the directors and nothing to do with the empoyment of the company. Am I correct that there may be an exemption in this personal relationship sitiuation so no PAYE implications also arise?

Also no monies were paid by director 2 for the shares as these were deemed to have no really value as the deceased director had done little or no work for the company during the previous 18 months due to the illness. Given this do readers think HMRC would agreed the shares were not gifted at under value for CGT purposes.

Many thanks
Jason Sharp

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By kenmoody
18th Jun 2008 15:21

This sounds like it would be covered by ...
... section 421B(3) ITEPA 2003 i.e. shares acquired in the normal course of family or personal relationships. Thus the shares would not be employment-related and would not require reporting on form 42. As the shares are not acquired by reason of employment there is no income tax charge on acquisition and in any case PAYE/NIC are not normally payable on acquisition of private company shares.

You can't argue that director 1's shares weren't worth anything because he didn't do anything. He still owned half the company. However, if the executors agree, director 2 and they could joinly elect to hold over any gain under s165 TCGA 1992. It is in their interests to do so so I don't see why they would not agree.

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