Limited company share transfer and tax implication

Property limited company share transfer from existing directors to existing directors

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Good morning, 

Seeking your advice in relation to a limited company with alphabet shares set up with 4 directors, with the purpose of investing in property. 

The company set up is as follows: 

- 4 directors A, B, C and D. A and B are one married couple, C and D are a second married couple
- Directors A and B have 44 shares each, out of 100, so they jointly own 88% of the limited company
- Directors C and D have 6 shares each, out of 100, so they jointly own 12% of the limited company
- Shares are £1 each
- Director's Loans have been made to get the company started, with 88% of the money provided by A and B, and 12% by C and D
- A property has been purchased, and a refurb is in progress, utilising 100% of the capital lent. 

At this juncture, the directors have all agreed that they wish to re-balance the ownership to a balanced 25/25/25/25, from 44/44/6/6
The intention is to carry out these steps: 

- Prepare a share transfer form and carry out necessary fillings with companies house
- Directors C and D will issue a Directors Loan to the Ltd Co to cover the difference between their initial investment and 50% of the total investment. 
- The money from the new Directors Loan will be issued to repay part of Directors A and B's initial loan. 
- At this point, Director Loans for the same amount will be outstanding, but split 50/50 between director pairs. 

Does this approach seem sensible? Or does the fact that a house has now been purchased mean that a more complex evaluation process need to be carried out etc. 

Thanks in advance! 
 

 

Replies (9)

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By David Ex
28th May 2024 10:56

crouesty13 wrote:

Seeking your advice in relation to a limited company with alphabet shares set up with 4 directors, with the purpose of investing in property. 

 

https://www.accountingweb.co.uk/any-answers/how-to-use-any-answers

“If you intend to plan a course of action based on what you read in here, you should instead be taking professional advice.”

“They are not here to provide free accounting advice.”

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By taxdigital
28th May 2024 12:26

All respondents on this forum are currently busy advising clients who have already paid for the advice. Your question is important to them; please try again later. Meanwhile, do visit www.gov.uk for invaluable advice on complex matters such as the one posted by yourself.

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By paul.benny
28th May 2024 16:24

I have a small gap between clients, so will comment briefly:

- the loan shuffle you describe works to equalise the funding. But doesn't affect ownership of the company.

- if the loans are interest-bearing, I'm sure you will be filing the CT600 in the company and that the directors will including the interest in their tax returns

- on the face of it, it is reasonable for A and B to sell shares to C and D at par, but the shareholder agreement you doubtless put in place may specify how the price should be calculated.

- remember that the share transfers must be stamped and the change of PSC will need to be filed at Companies House.

But the adviser who helped you with this structure should be able to help with all of this, including the filings. If I may suggest, you should challenge them as to their rationale for investing in property through a company.

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Replying to paul.benny:
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By nrw2
28th May 2024 17:53

paul.benny wrote:

if the loans are interest-bearing, I'm sure you will be filing the CT600

Don't forget the CT61 filings :)

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Replying to paul.benny:
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By David Ex
28th May 2024 18:04

paul.benny wrote:

But the adviser who helped you with this structure should be able to help with all of this, including the filings. If I may suggest, you should challenge them as to their rationale for investing in property through a company.

Good point. If, indeed, advice was taken ….

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Replying to David Ex:
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By FactChecker
28th May 2024 18:51

Conversation with MDTP ...
Me: "The McLaren F1 is a sports car, correct?"
MDTP: "Course!"
Me: "And you're qualified to drive cars aren't you?"
MDTP: (looks insulted but) "Yes"
Me: "So you'd know what to do if you crashed one?"
MDTP: "Don't be stupid .. you need specialists to get it back on the road"
Me: "Now about that company you were telling me you've set up all by yourself ..."

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Replying to FactChecker:
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By David Ex
28th May 2024 20:49

FactChecker wrote:

Conversation with MDTP ...
Me: "The McLaren F1 is a sports car, correct?"
MDTP: "Course!"
Me: "And you're qualified to drive cars aren't you?"
MDTP: (looks insulted but) "Yes"
Me: "So you'd know what to do if you crashed one?"
MDTP: "Don't be stupid .. you need specialists to get it back on the road"
Me: "Now about that company you were telling me you've set up all by yourself ..."

Suspect it was MDTP Property Solutions LLP, to be fair.

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Replying to David Ex:
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By paul.benny
28th May 2024 18:52

Oh. Do you think the OP and their co-venturers came up with this by themselves? How very rash!

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By Tax Dragon
28th May 2024 20:27

Loans and shares are two different types of investment which seem to have become horribly conflated in the 2 couples' thinking and proposal.

But, if the question is supposed to be "does this have tax consequences?", then the answer is "yes". Without further information, I cannot confirm what the consequences are.

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