Hi,
I have a client who has issued some shares for non-cash consideration as they are in lieu for work - what book keeping entries do I need?
Are there any tax considerations that I need to be aware of?
Any comments appreciated as I haven't touched on this area before.
Many thanks
Louise
Replies (10)
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Is the supplier's invoice for the work already sitting in creditors in the client's books?
If so that's where the debit for the share issue goes.
If not, get the client to obtain the invoice and then proceed as above.
Employment status
Once again, we have a querist who expects an answer yet is economical with the information.
Is this an employment or self employment ?
Is there any VAT ? Or PAYE/NI ?
What's the price of the shares ?
Is the difference to be made up in cash or through DLA ?
You need to work out the tax status of the individuals viz a viz the company, and whether, and if so how, they are taxable on the income that they receive in the form of additional shares.
Think of it in terms of what the position would be if the company paid them for their services in cash.
Agree with John
Just because the company is not yet an employer doesn't mean that it won't need to deduct tax and NI from the payments for the shareholders' work.
I was actually asking whether the shareholders were VAT registered, rather than the company. Supplying self employed services to a company is problematical but you have a better chance if the workers were already in business, providing the services that they provided to the company. Setting up a business specifically to provide services to the company - and supplying no other customer - looks contrived.
And when that side of things has been thought through and sorted out, and the unpaid considerations for the shareholders services are sitting as credit balances in the company's books, where to put the debit for the share issues will then become obvious. The only difficulty here is that you seem to be trying to account for the transactions in reverse chronological order.