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Shares incorrect for number of years

Client thought that shareholding was split 50-50 between him and partner, was not

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I have been working on my first return with a new client who runs the Ltd co with his wife.

When I checked companies house however, he is the only shareholder, not his wife, who he thought was a shareholder; she's just a director.

The issue is the previous accountant has not adjusted this or completed a transfer of sorts, but has been splitting dividends 50/50. I presume from my conversation was that the intention was that she should always be a shareholder.

Would it need re-stating all the prior returns as I fear?

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By JoF
12th Jan 2020 20:21

dfens wrote:

I have been working on my first return with a new client who runs the Ltd co with his wife.

When I checked companies house however, he is the only shareholder, not his wife, who he thought was a shareholder; she's just a director.

The issue is the previous accountant has not adjusted this or completed a transfer of sorts, but has been splitting dividends 50/50. I presume from my conversation was that the intention was that she should always be a shareholder.

Would it need re-stating all the prior returns as I fear?

You need to get to the facts....you seem unsure.

This probably should've raised its head at the MLR stage when you took the client on.

Surely the client has some paperwork that shows the correct position? Board resolutions if nothing else.

You appear to be blaming a fellow professional. That being the case would the client not have some correspondence (emails) covering such a request?

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Psycho
By Wilson Philips
12th Jan 2020 21:28

What does the Register of Members say?

What is filed at Companies House is often incorrect (although in truth the company’s statutory records can’t always be relied upon to be accurate).

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By Justin Bryant
13th Jan 2020 09:59

There should be no problem here provided that whatever was agreed re the BO was actually agreed, since then there is a bare (or possibly resulting/constructive/express) trust from that date of the intended shared share ownership. There was a similar case on this point a few years ago where I recall the parties weren't in agreement (re the BO split) and where the parties are in agreement I see no problem at all and it can be simply documented any time subsequently on a clarificatory basis if necessary.

Fyi para 94 et seq here shows there’s no need for a subsequent DoT as an express constructive trust is good enough in equity (based on the evidence of a simple non-contractual letter in this case and presumably if the parties agree the existence of such a trust (agreed verbally from the outset) then that’s also good enough re equity & therefore also re tax etc.):

https://www.bailii.org/ew/cases/EWCA/Civ/2019/2094.html

NB per the following text book extract cited with approval in para 95 HMRC would have a high evidential hurdle to disprove the expressed mutual agreement of the parties (since HMRC would have to plead sham or fraud to disprove that purported agreement) and in this context that mutual agreement must mean either an unwritten or written agreement that may or may not be subsequently (re)confirmed in writing and in the unwritten case a simple letter from the relevant trustee party (many years) after the agreement (to confirm their trusteeship etc.) is sufficient evidence re this point.

“....If the parties agreed that the claimant should have some defined share, effect will be given to that agreement”

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