Transfer of shareholding limited co between father and son

Transfer of shareholding limited co between...

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Afternoon,

The situation is as follows.

A father started a limited company professional services firm (similar to accountancy) around 20 years ago.

When the son joined 6 years ago the father transferred shares with a nominal value of £40 (Out of £100) to him as a bonus <

1. Should a transfer form have been sent to the HMRC here? Even if the consideration is simply the nominal value of the share?

The father now would like a buy-to-let mortgage and thus needs a higher dividend income.

2. Can he now reverse that transfer in a similar way without a transfer form?

Advice is appreciated in advance.

Replies (3)

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By johngroganjga
22nd Aug 2013 14:10

If the consideration for the transfer 6 years ago was less than £1,000, and Certificate 1 on the back of the transfer was completed and signed, then no stamp duty was due and it was not necessary to send it to HMRC for stamping.

It is not open to the father to "reverse" the transfer unless he has in some way retained beneficial ownership and can require the son to transfer them back to him.

If the son wishes to transfer shares to his father he can of course do so.  As with all transfers of shares this will be achieved by the son signing a share transfer form naming his father as the transferee.  I am not sure how you thought this could be done "without a transfer form".

You do not mention the tax consequences of either transfer.  I assume this is because you have that angle covered.

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By pembo
22nd Aug 2013 14:31

Er

think you may have an issue here.

A share transfer form should be signed every time shares are transferred otherwise it is potentially not legally binding. The form does not need to be sent to HMRC unless stamp duty is payable. The current deminimus for value is £1000 but applies to transfers after 13 03 2008. 6 years ago is before then so yes the form should have been stamped by HMRC. However he can transfer them back for £40 (assuming son agrees) through a share transfer form without sending it to HMRC as the £1000 limit applies.

Presumably the AR each year has reflected this transfer and the son has had dividends ?

Another issue is that accountancy/similar practices do usually have value. If dad started it 14 years before son joined then it is likely that 40% of the company had potential for considerable value. If so was a hold over election made and the gain returned to HMRC on dads tax return ? If not then he may be out of time depending on the date of transfer. Finally if the value of the firm has increased in the interim then son may have a CGT issue with the need for a hold over election if the shares are transferred back. If you've covered those angles great but thought it should be pointed out for completeness.

 

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Replying to atleastisoundknowledgable...:
By johngroganjga
22nd Aug 2013 14:35

De minimis

pembo wrote:

The current deminimus for value is £1000 but applies to transfers after 13 03 2008. 6 years ago is before then so yes the form should have been stamped by HMRC.  

Apologies - yes I was assuming, without checking, that the current de minimis limit of £1,000 applied 6 years ago, but I agree that it only applies to transfers after 13 March 2008. 

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