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Gift Hold-Over Relief on Shares

Can Gift Hold-Over Relief be claimed on Shares

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Limited company two directors and equal shareholders. Company started trade late 2017. First year accounts show 150K Turnover with 70K profit.  Second year of trading looks similar.  All monies are withdrawn through salary and dividends.  Company has no fixed assets

One of the directors has left the company as he has moved away.  The remaining director wants to transfer the shares to his girlfriend at nil consideration which the departing director is fine with

However the shares do have some value and there would be capital gains/Stamp Duty Tax implication.  What is the best Valuation method for a start up ?  Would there be a case for the shares to have a nominal value ? Can gift relief be claimed in this situation ?

 

 

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By Matrix
24th Apr 2019 16:18

Which shares are being transferred - those held by the Director who has left to the girlfriend of the Director who is staying?

And he doesn’t want anything for them? Why would there be CGT or stamp duty if the consideration is nil?

Yes they can be gifted but a valuation would still be required and hold over relief claimed and submitted on both the transferor and transferee tax returns. Once you put Director salaries through the value may be quite low.

Does she work for the company? I would suggest they take legal advice and get a shareholders agreement, not that they will but 50:50 is always a problem.

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Replying to Matrix:
Psycho
By Wilson Philips
24th Apr 2019 16:26

Matrix wrote:
Why would there be CGT or stamp duty if the consideration is nil?

Yes they can be gifted but a valuation would still be required and hold over relief claimed and submitted on both the transferor and transferee tax returns.


You seem to be contradicting yourself!
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Replying to Wilson Philips:
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By Matrix
24th Apr 2019 17:36

I was trying to answer the OP’s questions about gift relief. He seems to think there would be a value and mentions CGT and stamp duty so I wasn’t sure if nil consideration was really what was happening.

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Replying to Matrix:
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By JimLittle
24th Apr 2019 16:36

Many Thanks for the response

Which shares are being transferred - those held by the Director who has left to the girlfriend of the Director who is staying? Correct

I thought would be market value hence would replace the nil value hence CGT would apply unless gain is held over.

Sorry, do not quite understand this point below as the director left a couple months back

"Once you put Director salaries through the value may be quite low."

She does work for the company due to the nature of relationship - while it is sensible I do not think they will go for a shareholders agreement

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By Matrix
24th Apr 2019 17:41

Why market value if it is on arm’s length terms? Are they connected?

If I was valuing a company with low salary/dividend extraction then I would need to put in a market rate for the Directors’ pay. Have you been asked to value the shares?

If she is an employee then you also have employment related securities issues to consider. What do you mean by due to the nature of the relationship?

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Replying to Matrix:
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By JimLittle
25th Apr 2019 12:05

They would be connected (albeit indirectly) wouldn't they if its the other directors girlfriend shares are being transferred to ?

Not been asked yet to value the shares but if Shares have to be valued then yes put adjust the valuation with market rate for directors pay

She doesn't have an employment contract but has only last week started to work on the book-keeping. She is not paid a salary as yet. Would it be sensible not to pay her a salary until the shares are transferred to her ?

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