Issue shares for no cash

Issue shares for no cash

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HI

Just want to make sure i am not over complicating things in my mind.. Lets say 20% of business X to be given to Mr A.

Mr A will agree to place minimum amount of work with business X per annum. And will work together on this work.  For this A will get 20%.

How is this accounted for 1) in the accounts and 2) any cap gains tax issues  eg what is the base cost of the 20% shares?

Help appreciated.

Replies (6)

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Nichola Ross Martin
By Nichola Ross Martin
11th Aug 2011 11:24

An unapproved share scheme

A will expect to pay income tax on the money's worth (market value) of the shares he is given, It sounds as though the plan could be for A to remain self-employed, this may be untenable in the circumstances and quite a compliance risk.

The company should, if this is structured right receive a CT deduction.

You have created an unapproved share scheme! I would be extremely careful about the contents of the Articles and you need to value the 20%. You will need to consider an appropriate election depending on what you have agreed to ensure that any future PAYE inspection is not both complicated and costly.

Virtual tax support for accountants: www.rossmartin.co.uk

Thanks (1)
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By pawncob
11th Aug 2011 12:19

Whose shares?

Is the company going to issue these new shares or are they being gifted/sold by existing members?

I can't see any unapproved share scheme here.

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By blok
11th Aug 2011 12:54

.

me either.

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By Fidodido
12th Aug 2011 11:31

It can be done either way.  X

It can be done either way.  X can issue new shares or transfer existing.

I was going down the tfr of existing shares route.

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By david5541
13th Aug 2011 16:45

shares issued 20% rights in return for business loyalty?

so although you have said nothing distinguish Mr A from Business X are we to assume business X is already incorporated or will it incorporate as part of the deal? which one?

Thanks (1)
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By david5541
13th Aug 2011 16:46

shares issued 20% rights in return for business loyalty?

so although you have said nothing to distinguish Mr A from Business X are we to assume business X is already incorporated or will it incorporate as part of the deal? which one?

Thanks (0)