CGT Implications of Issuing Shares
I have a client company which is very profitable (profits approx. £1m pa) - it has three shareholders all owning 30 ordinary shares each.
They want to invite another shareholder into the business who has a similar / complementary business which is currently loss making but which they feel has huge potential. This person would also become a director and receive a small salary & dividend etc.
They would like to issue 10 new ordinary shares to the new shareholder in consideration of him transferring his trade into their existing business.
Are there any capital gains tax implications for the existing shareholders because under the new structure they will own 30% of the shares each as opposed to 33.3% etc. i.e. do the S29 value shifting provisions apply and also are there any tax (benefit in kind) issues for the incoming shareholder? I don't think there are any CGT implications for the existing shareholders as it is a fresh issue of shares nor do I think that there are any tax issues for the incoming shareholder as he is not receiving shares by virtue of his employment etc. but any expert advice would be very welcome.
As ever, my apologies if my understanding is basic but I do not have a huge amount of experience in these matters.