Form 42 - valuation

Form 42 - valuation

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Is there now no requirement to put a market value on shares issued to directors on form 42?
If so how do HMRC pick it up?
Is it up to the director to include it on his Tax Return as a benefit?
ADS

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By AnonymousUser
13th Sep 2006 17:48

It is correct that valuations ...
... are not required for form 42 except in the case of options. If the shares are readily convertible assets then PAYE and Class I NICs apply so you would have to put a value on the shares for that purpose. SV provide an informal (post transaction) valuation service for this purpose but I don't know how well it works in practice. However, most private company shares are not RCAs and so there will be no need to value for PAYE purposes.

Apart from reporting the acquisition on form 42, if shares are issued at an undervalue this needs to be declared in the individual's tax return - share scheme pages - box 2.33 spings to mind but I haven't checked.

Hope this helps. By the way the acquisition is not a P11D item so don't feel tempted to declare as a benefit - it's not a benefit. It's general earnings taxable under s6 ITEPA by virtue of s62 (Earnings) rather than s63 (the benefits code). Weight v Salmon & Ede v Wilson are authority that the undervalue is assessable as employment income on the 'money's worth' principle.

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By hallsi
12th Sep 2006 21:42

form 42
there is no longer a requirement to declare on Form 42 shares issued to directors when most companies are first incorporated.

if the company is in existence and a director is offered shares then this must still be declared on Form 42 (even if at market value). this gives HMRC opportunity to dispute the share valuation.

as far as I'm aware, if the shares are provided to the director at below market value then the company must deal with the difference through PAYE (unless the shares are restricted and the relevant election has been made).

I'm not expert in this area but no doubt others will provide a more comprehensive reply if needed.

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