I have been acting for a client for appox 8 months on newly incorporated company which hugely exceeded the inital projections on profit. The director has indicated to me that his wife wishes to resigning from her current employment and join the business full time becoming invoved in the accounts, office admin and sales side of the business. In doing so his wife will become a director and they would like her to receive an equal shareholder.
The business has a very healthy bank balance and debtors balance (circa £100K) despite the short life span of company and I therefore have concerns that by issuing a share to his wife he will be creating a paye tax liabilty on the company as she will be in receipt of an asset which has cost her nothing but will entitle her to significant dividends therefore placing a reasonable value on the shares. Can anyone clarify if this is correct and the best way to go about placing a value on the shares?
Thanks in Advance.
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Exemption
Simplest way is to transfer half of his shareholding. Transfers between spouses are exempt.
One option is to subdivide
Your client's company can subdivide the single share in issue to create any number of shares but with the same overall nominal value. It's a pretty straight forward procedure especially for a single director/shareholder company. As a starting point go to the Companies House website and search for form SH02.
Once the share has been subdivided 50% of them can be transferred to the spouse.