Transfer of shares

Transfer of shares

Didn't find your answer?

Hi, I wondered what is the current position regarding the transfer of shares by a one director/shareholder company to his common law wife who already has a role in the business and is an employee. If it can be done at what value should it be transacted at and do we have to notify anybody, such as Companies House/HMRC/Share transfer office for stamping etc.

Replies (6)

Please login or register to join the discussion.

By johngroganjga
01st Oct 2013 14:13

The price to be paid is a matter for negotiation between the couple. But for CGT purposes the transfer will be deemed to take place at market value.  But if the transfer is at an undervalue and the company is a trading company they can elect to hold over the gain, or part of it if some consideration is paid.

If stamp duty is payable the share transfer the form will have to go to HMRC for stamping, but not otherwise.

You don't have to notify Companies House as such, but the transfer will of course be reflected in the shareholder details on the next annual return.

The transferor will have to report the disposal in the CGT section of his next tax return.

Thanks (1)
avatar
By MBK
01st Oct 2013 13:08

But beware the settlements legislation ....

... if full value is not paid for the shares HMRC can seek to invoke the settlements legislation and the usual H&W get out of a gift otherwise than wholly a right to income isn't available to take it out of the legislation.

Thanks (1)
By gbuckell
01st Oct 2013 14:59

Not husband and wife

Sorry but do not understand MBK's comment. As they are not spouses the settlements rules do not apply anyway. The special rule about outright gifts only exists because a settlement is otherwise ineffective if the settlor or his spouse retains a benefit.

Thanks (0)
avatar
By MBK
01st Oct 2013 15:29

Not at all...

A settlement exists where there are arrangements (such as a share transfer) between any parties which involve an element of bounty. They don't have to be related.

In the settlements legislation such a settlement is deemed not to be a settlement if the property transferred (ie the shares) is from spouse to spouse and does not constitute a right to income etc etc.

It was precisely this deeming provision which got Mr & Mrs Jones off the hook in Arctic Systems.

But that deeming provision is, of course, not available to a "common law" partner - hence the problem.

 

 

Thanks (0)
By gbuckell
01st Oct 2013 15:50

Missing the point

With respect I think that you are missing the point. The key here is not whether a settlement exists but whether the settlor retains an interest and so is caught by the rule in ITTOIA 2005 s624. For this purpose an interest belonging to a spouse of the settlor is deemed to belong to the settlor [s625(1)(a)]. Thus, in the absence of a special rule, settlements between spouses will always be caught by s624. The special rule in s626 excludes outright gifts between spouses.

If the parties are not spouses the settlor is not deemed to retain an interest and so there is no need for s626. In other words such a settlor can make a settlement of income only and not be caught by s624.

Thanks (0)
avatar
By MBK
03rd Oct 2013 08:35

But HMRC will...

.... and have done successfully in cases involving shares in limited companies that, in a "common law" relationship it is inevitable that the settlor will have a retained interest by virtue of what is now ITTOIA 2005 S625(1)(b). The "retained interest" rule doesn't apply just to spouses.

Apologies, I should have made that clear earlier. I was just shortcutting to the nub. Of course, back to the original point I made, once you have the retained interest then the spouse let out isn't available in this situation.

 

 

Thanks (0)