Can my limited company own shares in my client's business?

Can my limited company own shares in my client...

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Hello,

I'm a consultant with my own limited company. My new client wants to offer me a business to business contract - where I'm paid a daily rate and I raise invoices at the end of the month. However as part of the contract, after 6 months of service they would like to offer me 0.05% stake in their business. This is of utmost importance to me and one of the prime reasons I want to render my services to this client. I believe in their product and think the company will grow tremendously. However I'm not sure if having a stake in their business makes it an Employee Related Security and brings me under the IR35 regulation. I am definitely not an employee of their business. We definitely want to have a business to business relationship. How can the stake part of the contract be achieved? Could it be worded such that my limited company (and not me personally) can have stake in the client's business after 6 months? If so what are the tax implications (e.g. capital gains tax if the company valuation increased at a later date) and tax reporting implications?

My current accountants can't seem to help. Any inputs will be greatly appreciated.

Many thanks in advance

Replies (6)

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By User deleted
25th Mar 2015 11:38

Hint re Employment Related Securities

Is your company an employee?

IR35 status will be what it will be, regardless of the proposed shareholding.

If your current accountants are unable to advise on this, I suggest that you switch - pronto.

Thanks (3)
Replying to sammerchant:
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By Su-personic
25th Mar 2015 12:00

Thanks BKD,

Is there no way around this? Is it not possible for one business to offer shares to another business for services rendered?  Alternatively they're offering a bonus if I forego the stake. Would that be okay and not employee-like behaviour?

We have started looking at other accountants to switch to :-)

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By johngroganjga
25th Mar 2015 12:10

Way round what?

Yes of course your company can take shares if you decide it is in the company's interests to do so.  What you need is advice so that you understand the tax and other consequences of doing so, which it is good to see you are looking for other accountants to help with.

You do not seem to be seeking advice on whether acquiring shares in the company in question is a good investment. If you want such advice you won't get it from accountants. 

Thanks (2)
Replying to Duggimon:
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By Su-personic
25th Mar 2015 14:53

Thanks for your response.

I wanted to know if there was a way around not coming under the IR35 purview as the share may be perceived as ERS. 

Yes, you're right in that I'm not looking for advice on whether acquiring these shares is good or not (I believe its a good investment). You're also right in that I need advice on what the tax implications are for the company. But one step before that, I'm looking for guidance on whether having such shares given to me puts me under risk of IR35 and how the contract must be worded so as to mitigate it.

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By User deleted
25th Mar 2015 14:59

Did you miss this?

IR35 status will be what it will be, regardless of the proposed shareholding.

Thanks (1)
By johngroganjga
25th Mar 2015 15:25

ERS is a red herring anyway as your company will pay tax on the value of the shares in any event won't it?

Thanks (1)