I have a client who owns a semi-recently incorporated software development company, y/e 30/6/21. Turnover per annum is expected to be around £150K and profit of around £80K. The company has 10 ordinary shares and has 2 A shares with exactly the same rights to distribution, voting, and assets on wind-up. The two additional A shares were issued on 9/8/20, shortly after incorporation. One shareholder owns all the shares and is also the only director.
The director wishes to gift £15,000 total to his mother and father (married). He wishes to transfer one of his A shares to his mother and then declare a £15,000 dividend for the A shareholders. At the time there will be > £30K reserves and he would receive the other £15,000.
How would you deem the market value of the share that is transferred? Would you base it on £150K turnover and 12 shares will could you simply go with 1/12ths of the turnover or profit? If the above is true and the share is transferred at £1 I suspect that would be transferred at deemed MV of £12.5K which would be just under the AEA.
Finally. the client has not mentioned this but what would happen should the parents take a dividend then transfer the shares back to my client, again for £1? The base cost of their share is £12.5K and they sell it back to him for say £13K. They'd realise a gain (13000-12499?) on the remaining amount and now my client would have one share with a base cost of £13K. He has therefore increased the base cost of his share by transferring it to his mother and transferring it back.
I must be missing something here???
Any help is greatly appreciated.