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existing 50/50 - gifting shares to one spouse

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I have a client with a private limited company, currently two director/shareholders (50/50). One of the directors would like to gift shares to spouse. Thoughts are that this could be done by additional share issue (rather than transferring) to make the shareholdings approx 33% each. The spouse would be carrying out a substantial amount of work on behalf of the company. Would there be any capital gains implications due to the other director/shareholder or any other issues I should make them aware of? 

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30th Apr 2019 13:13

CGT: yes.
Other: yes.

If values are large, buy in advice.

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By R Stack
30th Apr 2019 13:33

There isn’t really any funds/reserves in the business. The spouse is mainly being taken on to help generate/increase business due to her skill set

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30th Apr 2019 13:56

Assuming the spouses are living together as such, there are no tax consequences of any transfers of shares between them.

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30th Apr 2019 13:57

1) Issuing further new to the spouse would give the couple control of the company. How does the other director feel about that?

2) Why does spouse need to be a shareholder? It the company has no net assets, surely being a shareholder doesn't serve any purpose.

S/he can be a director if it's a question of status.

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By R Stack
30th Apr 2019 14:11

Thanks to you all for your replies so far. In response to Paul.benny.

Point 1 - the director that contacted me for advice hasn’t discussed with the other yet, so at this point this is not clear.

Point 2 at this point no real point in being a shareholder but if/when business increases then she will be entitled to dividends as she will be contributing to the business as much as the other two existing shareholders & would like to be remunerated accordingly

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30th Apr 2019 15:02

As discussed elsewhere, if new shares are issued to spouse for little or no consideration (you mention the word "gift") there are possible Employment Related Securities implications.

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By R Stack
30th Apr 2019 16:23

Ok thanks. Not sure if this makes a difference but for additional information the spouse is not currently an employee of the company and will be leaving her PAYE job to work solely for the company in the future

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By Matrix
to R Stack
30th Apr 2019 17:12

They need to decide commercially what they want to do and then you can advise them on the best way to do it. Given that H and W would have control and the other shareholder will be diluting their shareholding, I really wouldn’t rack up time before you know the facts.

She can readily go on the payroll and if her husband wants to transfer his shares he can (although they would have to vote together), but see what they agree rather than justifying why she should receive shares (or are you the husband or wife?).

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to R Stack
30th Apr 2019 19:53

R Stack wrote:

Not sure if this makes a difference but... the spouse... will... work solely for the company...

You're not alone in this forum in completely failing to grasp what "employment related" means.

But I agree with Matrix. Someone needs to think about what they want.

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By R Stack
30th Apr 2019 20:48

Fair comment tax dragon. I merely posted to try & help a client, but will advise him to seek advice from someone far more qualified than myself who will advise him accordingly. This reminds me of why I don’t usually use forums

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to R Stack
30th Apr 2019 21:07

I meant no offence. But if, as you say, you are not competent to advise on this matter then you are not helping a client by trying to.

Chances are that if one spouse gives to another then there is no tax - as John said - but issuing new shares is a whole different ball game. Both in terms of outcome and tax.

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30th Apr 2019 22:08

Would you, as a co-owner, willingly relinquish effective control of your company to a husband and wife team?

There might need to be a remarkable commercial imperative for the director to accede to this proposal.

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