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Selling my share of business to my brother for £1

I want to gift my shares to my Brother in the most tax efficient way

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I am a 50% shareholder in a property company. The company has several properties with associated legal charges.

My DLA owes me circa £0.5m. I want to gift my shares to my Brother. I am not expecting a penny for this. Is there a way to do this tax efficiently? I am not expecting any money towards my DLA i.e. this should be transferred in his favour.

Please advise. Thanks in advance.

Replies (37)

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By Paul Crowley
14th Jul 2020 22:03

Sale at undervalue to related party?

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Replying to Paul Crowley:
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By bdotadot
14th Jul 2020 22:06

It’s not a sale, it’s a gift.

A sale at undervalue may have negative ramifications for the other shareholder. I’m unsure

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Replying to bdotadot:
By Tim Vane
14th Jul 2020 23:13

Quote:

It’s not a sale, it’s a gift.

A sale at undervalue may have negative ramifications for the other shareholder. I’m unsure

Selling shares for £1 is not a gift. It’s a sale and implies a contract.

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Replying to bdotadot:
RLI
By lionofludesch
14th Jul 2020 23:21

Quote:

It’s not a sale, it’s a gift.

A sale at undervalue may have negative ramifications for the other shareholder. I’m unsure

Make your mind up whether it's a sale or a gift. Either way, HMRC will be charging CGT on the full value.

Then there's a possible IHT charge to consider.

You seem to have a few bob to spare. Get some proper advice before you commit to doing something crazy.

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Replying to lionofludesch:
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By bdotadot
14th Jul 2020 23:30

The CGT is my concern. IHT isn’t a concern at this stage. Seems very complex considering I want to transfer my DLA to my Brother too

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Replying to bdotadot:
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By WhichTyler
15th Jul 2020 06:02

Is there a shareholder's agreement (hope so)? Does your bro have to take up the responsibilities under it along with the shares?

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Replying to bdotadot:
Psycho
By Wilson Philips
15th Jul 2020 08:58

It’s not complex at all. You pay CGT based on the market value of the shares. It can’t get much simpler.

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Replying to bdotadot:
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By memyself-eye
15th Jul 2020 09:42

IHT will be a concern if one or both of you gets run over by a bus (probably an empty one these days)

Do as advised - get paid for advice.

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By Paul D Utherone
14th Jul 2020 23:18

Quote:

I am a 50% shareholder in a property company. The company has several properties with associated legal charges.

My DLA owes me circa £0.5m. I want to gift my shares to my Brother. I am not expecting a penny for this. Is there a way to do this tax efficiently? I am not expecting any money towards my DLA i.e. this should be transferred in his favour.

Please advise. Thanks in advance.

Thanks (2)
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By Tax Dragon
14th Jul 2020 23:47

Do you care about your brother's tax or just your own?

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Replying to Tax Dragon:
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By bdotadot
15th Jul 2020 08:28

I want the best scenario for him to take over my shares and my DLA

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By mrme89
15th Jul 2020 06:47

If you had enough to lend the company a few bob, you’ve probably got enough to pay a few hundred quid to pay for professional advice so you don’t c*ck it up.

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By Tax Dragon
15th Jul 2020 07:08

BTW if it's part of a bigger plan (to hide assets in a divorce, say), then it could create tax charges for you and your brother whilst failing in its objective. That really would not be clever. (Hence references to male chickens and recommendations not to act without buying situation-specific advice.)

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Replying to Tax Dragon:
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By bdotadot
15th Jul 2020 08:31

That is one potential scenario but not currently an issue. Let’s say it was all transferred now and a divorce happened 5 years down the line, would it still come across as me hiding the assets ?

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Replying to bdotadot:
RLI
By lionofludesch
15th Jul 2020 08:49

Quote:
Let’s say it was all transferred now and a divorce happened 5 years down the line, would it still come across as me hiding the assets ?

5 years? Nothing like planning ahead....

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Replying to lionofludesch:
Red Leader
By Red Leader
15th Jul 2020 12:27

I've pencilled mine in for about then.

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Replying to bdotadot:
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By Tax Dragon
15th Jul 2020 09:35

bdotadot wrote:

That is one potential scenario but not currently an issue. Let’s say it was all transferred now and a divorce happened 5 years down the line, would it still come across as me hiding the assets ?

I read that question as: "I am hiding the assets; do you think I am hiding them well enough?" Which is not a tax or accounting question. Wrong forum. (But anyway don't use a forum. Use a solicitor. [And/or a marriage guidance counsellor. If you plan now to divorce in five years, you will divorce in five years if not sooner. If you commit to the marriage, you might turn it around in that time. This isn't an agony forum either, but it does seem to be the case that, if someone prepares for their marriage to fail, then their marriage will fail.])

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By lesley.barnes
15th Jul 2020 08:47

Not often I'm left speechless, will your brother be selling sorry gifting the shares back after your divorce? Whatever you are planning it won't work, a forensic accountant will follow the trail and find were you have hidden assets.

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Replying to lesley.barnes:
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By bdotadot
15th Jul 2020 09:00

I’m sorry if it’s come across as a scheme relating to a potential divorce, it’s not.

In essence, the business was set up 10+ years ago. It was his money but it was set up in my name. The company has grown exponentially and I want to give him back what’s rightly his

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Replying to bdotadot:
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By bernard michael
15th Jul 2020 09:26

Quote:

I’m sorry if it’s come across as a scheme relating to a potential divorce, it’s not.

In essence, the business was set up 10+ years ago. It was his money but it was set up in my name. The company has grown exponentially and I want to give him back what’s rightly his


The plot thickens
How is the debt due to him shown in the accounts? Let me guess he gave you the money and the DLA is actually his money
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Replying to bdotadot:
By ireallyshouldknowthisbut
15th Jul 2020 09:27

All this extra info is why people keep on saying TAKE_PROPER_ADVICE

it may be with that new snippet you have no gain arising at all if you hold them on trust for your brother.

As ever trying to be clever and "put things in others peoples names" doesn't flipping work.

Which is why you need a professional to advise you of how much of muddle you have got yourself into through trying to be clever.

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Replying to ireallyshouldknowthisbut:
Hallerud at Easter
By DJKL
15th Jul 2020 09:33

Agreed,Marmion springs to mind,

"Oh, what a tangled web we weave
When first we practice to deceive!"

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Replying to bdotadot:
RLI
By lionofludesch
15th Jul 2020 09:38

Quote:

In essence, the business was set up 10+ years ago. It was his money but it was set up in my name. The company has grown exponentially and I want to give him back what’s rightly his

I give up.

If you won't tell us the full story, you can't rely on the replies you get.

Go and get some proper advice. There's clearly a lot of money at stake here.

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Replying to bdotadot:
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By Tax Dragon
15th Jul 2020 09:40

Quote:

I’m sorry if it’s come across as a scheme relating to a potential divorce, it’s not.

In essence, the business was set up 10+ years ago. It was his money but it was set up in my name. The company has grown exponentially and I want to give him back what’s rightly his

My apologies. My above comment was made before catching up with developments.

So it was your brother's divorce, not yours. So it's past hiding and present tax charges. Suggest he pays the tax, yours included. (Which isn't necessarily just on the shares.)

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Replying to Tax Dragon:
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By bdotadot
15th Jul 2020 09:46

Thanks all for your input thus far. I appreciate that my post was ambiguous. I do want to clarify that as I am posting anonymously, I was being as blunt as I could. However it's not anything illegitimate or untoward that i'm seeking. I want to give back to my Brother, what's rightly his. It was his investment into the company which was done under my name.

All the talk of divorce has cast doubt on mine or his marriage, that is not presently an issue but it's the same as getting a prenuptial agreement, you're just making sure of a potential eventuality.

It seems that professional advice should be sought. I wanted to gather the info from the forum before sounding like a [***] in front of our financial advisers and them frowning upon what we're doing.

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Replying to bdotadot:
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By Tax Dragon
15th Jul 2020 09:54

Why do you have what is rightfully your brother's?

If it's nothing illegitimate, why not just tell us?

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Replying to Tax Dragon:
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By bdotadot
15th Jul 2020 10:11

I just have that kind of relationship with my Brother. The trust is there.

He has left it in my name for so long and we've toyed with the idea of transferring shares for a while, just not pursued it.

Now that there are wives and kids involved, he'd like to take ownership.

The set up was initially done before there were any marriages and kids in the picture and we did not foresee this issue. We were both late teens.

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Replying to bdotadot:
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By Tax Dragon
15th Jul 2020 10:18

And the half-a-million? That presumably does not date back to your teenage years. How came you by that money?

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Replying to bdotadot:
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By frankfx
15th Jul 2020 10:44

Quote:

Thanks all for your input thus far. I appreciate that my post was ambiguous. I do want to clarify that as I am posting anonymously, I was being as blunt as I could. However it's not anything illegitimate or untoward that i'm seeking. I want to give back to my Brother, what's rightly his. It was his investment into the company which was done under my name.

All the talk of divorce has cast doubt on mine or his marriage, that is not presently an issue but it's the same as getting a prenuptial agreement, you're just making sure of a potential eventuality.

It seems that professional advice should be sought. I wanted to gather the info from the forum before sounding like a [***] in front of our financial advisers and them frowning upon what we're doing.

A company with £500,000 on DLA , I would imagine already uses the services of an accountant. more so as OP states it has grown exponentially.

Yes there are financial advisers .

Surely the elephant in the room, now entering this forum, would have been subject to discussion with accountants, and lending bruv......asking :

'' when am I getting my dosh back ,£500K ?''
' don't know mate,. I am too embarrassed to discuss with advisers'
''even though we have been really successful, I do not want them to think I am a ***''

I do not think they would view you in *** light.

So why have you reached that conclusion?

I am itching to know.

I am sure they will not be frowning when they discuss the fees for resolving this family opportunity, frowning would make them look like ***. Never good when billing a client for excellent service.

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By Paul Crowley
15th Jul 2020 09:49

No idea what the shares are worth, but £500,000 DLA is definitely a material sum to be in the wrong name.

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Replying to Paul Crowley:
Hallerud at Easter
By DJKL
15th Jul 2020 10:18

And certainly begs the question regarding how and why it all arose.

Whilst not saying a SAR is on point, as there is a dearth of information, if I had received this company and family as a prospective client I think I would want a very full history of what has arisen, why it arose and where all monies came from before being happy to act.

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Replying to DJKL:
Psycho
By Wilson Philips
15th Jul 2020 10:47

This thread is likely to run to 3 pages before we get anything like the level of detail required. Time for the OP to sit down in front of a tax adviser.

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Replying to Wilson Philips:
Hallerud at Easter
By DJKL
15th Jul 2020 11:01

Maybe I have a suspicious mind but the slow drawing of information here makes me suspect the questioner might really be one of us.

It reminds me of a Hodgson Impey audit training exercise I did in circa 1985/1986 where we were split into groups and a partner visited us room by room and for a few minutes we got to ask questions about the accounts and he gave us really slippy answers (which was probably appropriate as the mock company we were auditing was something like Dogfish Limited, the winning team getting a dogfish to cook- if you work for a practice with a Hull HQ then fish were always going to figure high on the agenda)

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Replying to DJKL:
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By Tax Dragon
15th Jul 2020 11:11

Why do so many dodgy and dismal things start with D?

Dogfish, divorce, dreary, depression, disease, death, deceit, drugs.

(Stop, Dragon. Think defamation. And damages. Or dismissal.... you're on a yellow, remember.)

Congrats though for writing "suspicious mind" and not breaking into song.

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Replying to Tax Dragon:
Hallerud at Easter
By DJKL
15th Jul 2020 11:43

Drat, you missed DJKL, duplicitous and dreich.

I come from a long line of Ds, my GF,GGF and GGGF were all Ds, but my GGGGF was an A.

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Replying to DJKL:
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By frankfx
15th Jul 2020 11:47

Quote:

Maybe I have a suspicious mind but the slow drawing of information here makes me suspect the questioner might really be one of us.

It reminds me of a Hodgson Impey audit training exercise I did in circa 1985/1986 where we were split into groups and a partner visited us room by room and for a few minutes we got to ask questions about the accounts and he gave us really slippy answers (which was probably appropriate as the mock company we were auditing was something like Dogfish Limited, the winning team getting a dogfish to cook- if you work for a practice with a Hull HQ then fish were always going to figure high on the agenda)

https://www.icaew.com/library/historical-resources/guide-to-historical-r...

Memory lane

Hull, library , Philip Larkin...'deceptions'-- dogfish' AKA Rock salmon aka shark

outcome: auditor. sceptical

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Replying to frankfx:
Hallerud at Easter
By DJKL
15th Jul 2020 12:36

Thanks for the family tree- I strictly came from the Chalmers Impey side via their Glasgow office, they merged in early 85 and I joined the CI Glasgow office in August 85.

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