Company A is being sold for 500,000 in August, more than one year after incorporation. The director owned the company for 14 months and in September 2016 gifted 50% of shares to wife. That allowed 5000 in dividends to be paid to her tax free in October and again in May. The company has earn't 100,000 in consultancy fees, so movement of shares is to benefit from tax free dividend payments.
Ahead of the sale wife has gifted here 50% back to husband / director. Will the husband get ER on 100% of sale, 50% or some time based prorated portion?
Thanks
Replies (13)
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Did you tell him to do these transfers? Did you know about the sale?
If so, then your client is probably fine..............
As I understand it, 100% will qualify provided that the conditions for ER are met (TCGA S.169H)
OK but she still may have an unused annual exemption so could have kept some shares. Nil is less than 10%.
Yes, but she has gifted them back to Hubbie pre-sale and so ER will be available on the whole of Hubbies' holding as he has owned more than the minimum 5% for more than a year (assuming all other ER requirements are satisifed of course).
I find it difficult to interpret "She wouldn't have held her shares for 12 months may be the issue" as anything other than "her shares will not qualify no matter from whose ownership they are sold"!
Personally, I find it difficult to interpret it any way other than that the purpose of the transfer was to move them from the wife's hands where they wouldn't qualify to the husband's where they would.
Then again, I'm not a complete moron.
To add that if they are selling for £500k have they engaged a tax specialist? If the company made profits of £100k how come it is suddenly worth £500k (just asking, if someone is willing to pay this then I would also accept it)?
Also does the wife have unused personal allowance or any room in her basic rate band (also 10% CGT)?