Form 42's

Form 42's

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I've been called upon to do Form 42's and can't fathom in what circumstnaces they are required.

I know that if A Ltd issues new shares to Mr Z this will need reporting.

I know that if A Ltd has issued shares on incorporation these do not need reporting.

BUT, if Mr Z gives some of his shares to Mr X (perhaps on his leaving or death) does this get recorded? The forms don't seem to allow me to differentiate between issued shares and transfered shares, it just asks for how many extra shares Mr X has compared to last year (which to me implies that a share issue has occured when in fact it may not have).

Could anyone clarify? Our clients are mostly fairly straightforward transfers (mostly between family members) due to retirement or death.

Daniel

Replies (6)

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By User deleted
06th Jul 2006 12:04

Poor old you!
Your comment about HMRC made me laugh though.

Page 6 and 7 of the guidance tells you what is not reportable.

If Mr Z gives shares to Mr X as a result of their personal relationship then no report is necessary. If Mr Z gives Mr X shares because Mr X has been a damned fine employee and Mr Z wants to reward or incentivise him then the scenario is reportable.
Hope that helps.

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By AnonymousUser
05th Jul 2006 12:43

Form 42
I thought that the necessity to complete these had been rescinded in respect of small companies and low value share transfers or allotments.

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By User deleted
05th Jul 2006 13:16

You may very well be correct
This is my first year of doing these forms but I am told that HMRC have reduced the number that need doing by loosening the rules.

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By sarahlawson01
05th Jul 2006 17:35

Deadline
Don't forget the filing deadline for Form 42 is 7th July.

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By User deleted
06th Jul 2006 07:55

Thanks Sarah, but...
... seeing as my topic pretty much says "Help! I need to do Form 42's but don't understand them" what was the point of reminding me of the deadline? I'm trying to find out what I need to do, until I manage that I can't do anything, regardless of when the deadline is.

I'm given to believe that I need to report any share movements (including transfers between shareholders in the company) but the Form 42's don't allow me to distinguish between a shareholder being issued shares and one receiving existing shares, so I'm tempted to believe that only the creation of new shares goes on.

Oh, and I have now spoken to 4 people at HMRC and all of them have said they have never heard of Form 42's and so can't tell me who to call or help.

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By barryhallam
06th Jul 2006 09:40

Briefly....

...a Form 42 is used to report the acquisition of securities (including shares)and some other events which arise by reason of employment. Hence the term "employment related securities"

The relaxation in the rules from 6/4/2005 principally excludes the acquisition of founder shares on incorporation (apparently about 80% of the cases that previously needed reporting).

All other acquisitions by employees are reportable - there are some limited exceptions for personal family and domestic relationships.

There is no differece between newly issued shares and the transfer of existing shares.

In your example if Mr Z gives Mr X some shares and that gift arose by reason of his employment then it would be reportable.

Transfers between family members are not necessarily covered by the exemption.

See HMRC website at http://www.hmrc.gov.uk/shareschemes/form42.htm

for more information.

I hope this helps

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