Additional capital contribution no share issuing

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Since there is not really a recognition for additional capital contribution in UK, I am asking the following case:a  100% shareholder and director (close company), he wants to add personally capital into his/her company without issuing new shares. At the end, he owns the whole company anyway not really a change.

As far as I understand, this will still be share capital but it's kind of a 'gift'  (not a loan as it would trigger the DLA) and treated as 'realised profit' on balance sheet it is a 'qualified consideration' (it's a broad definition so I guess valid for most cases).

Two questions:

-Is that right? Can be done as stated above?

-If the company goes into liquidation, and  assuming the company pays all creditors, are these funds following CGT procedure? So if the shareholder contributed for 100£ but the distribution of reserves is for 200, it has CGT on the difference 100 (minus 10% entrepreneur relief)? The fact that the contribution may be considered as a 'gift' worries me (so you cannot really apply CGT rules etc..).

 

 

Replies (12)

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JCACE
By jcace
08th Apr 2024 20:33

No harm in having a DLA where the company owes the director. Director can then be repaid in part or in full when the company wishes/has sufficient funds.

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By asasa
08th Apr 2024 20:45

Does not have tax implications? DLA over 10k you have to pay NC1 and have 33.75% corp tax until you repaid it (and yes then claim back but it's an effort)

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JCACE
By jcace
08th Apr 2024 21:00

DLA over 10K where the director OWES the company, i.e. where the director has borrowed FROM the company, is what attracts the benefit in kind charge, as well as potentially a s455 charge. But none of that applies where the director lends TO the company.
Best sit down with an accountant who can explain it all.

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By asasa
08th Apr 2024 21:11

I realised I did a very silly mistake. Thanks

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By Paul Crowley
08th Apr 2024 21:02

If he pays money into the company then the company owes him money. No tax issue at all.
Your understanding of this is really bad.
Get an accountant.

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By David Ex
08th Apr 2024 20:41

Doesn’t really make sense to me. You’d be best advised to speak to your accountant to understand what you’re trying to achieve and how best that can be done.

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By Matrix
08th Apr 2024 20:58

If it’s not equity then surely it is debt?

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By asasa
08th Apr 2024 21:03

yes

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By johngroganjga
08th Apr 2024 21:10

What do you mean by “DLA hurdles” and “NC1”?

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By asasa
08th Apr 2024 21:16

I just did a silly mistake.

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By Ruddles
08th Apr 2024 21:16

Simple question - why does the director not want additional shares?

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Replying to Ruddles:
RLI
By lionofludesch
09th Apr 2024 09:13

Ruddles wrote:

Simple question - why does the director not want additional shares?

My first thought.

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