Another "work for equity" thread
Long-time lurker, first time poster: looking for advice on the best way to structure an equity based deal.
First off the bat : yes I am going into this eyes open, I am aware of the risk that I will get a big fat cheque for zero pounds.
I'm a freelance web developer: sole-trader, not VAT registered. Previously done some work Client to build an online fee based service - work done, everyone happy : gone through my books, all paid up ??. Client is out of cash and has come back to me with an equity based deal. They need some additional development work done (perhaps a couple of weeks of time) plus are asking for on-going consultancy (a day or two a month) to keep things ticking over (manage their Google ads etc.) The deal is for a healthy chunk of the business - 20% split into 4 stages based on turnover/profits/sales (t.b.c): these will be ordinary shares with a hefty agreement in place including specifics around when dividends have to be paid.
My question is how to best to structure the arrangement. Their accountant is proposing existing shares are transferred by way of a gift, using Hold Over Relief to ensure no CGT is incurred unless/until I were to sell them. But all "" work "" that I do for them is strictly off the books - it doesn't go through my sole-trader business - just me, in my spare time. The only thing I'd need to do is pay tax if/when I receive dividend payments.
Am i right to be concerned by this arrangement? It just doesn't seem to stack up in my mind. I'd rather not get HMRC hounding me for "disguised renumeration" or some such. Up until now I've been perfectly comfortable doing my own returns using FreeAgent - feeling quite a bit out of my depth with it all. Is their a better approach I should be suggesting? Becoming a Director was mentioned at one point, but their accountant seemed reluctant about this.
First off the bat : yes I am going into this eyes open, I am aware of the risk that I will get a big fat cheque for zero pounds.
I'm a freelance web developer: sole-trader, not VAT registered. Previously done some work Client to build an online fee based service - work done, everyone happy : gone through my books, all paid up ??. Client is out of cash and has come back to me with an equity based deal. They need some additional development work done (perhaps a couple of weeks of time) plus are asking for on-going consultancy (a day or two a month) to keep things ticking over (manage their Google ads etc.) The deal is for a healthy chunk of the business - 20% split into 4 stages based on turnover/profits/sales (t.b.c): these will be ordinary shares with a hefty agreement in place including specifics around when dividends have to be paid.
My question is how to best to structure the arrangement. Their accountant is proposing existing shares are transferred by way of a gift, using Hold Over Relief to ensure no CGT is incurred unless/until I were to sell them. But all "" work "" that I do for them is strictly off the books - it doesn't go through my sole-trader business - just me, in my spare time. The only thing I'd need to do is pay tax if/when I receive dividend payments.
Am i right to be concerned by this arrangement? It just doesn't seem to stack up in my mind. I'd rather not get HMRC hounding me for "disguised renumeration" or some such. Up until now I've been perfectly comfortable doing my own returns using FreeAgent - feeling quite a bit out of my depth with it all. Is their a better approach I should be suggesting? Becoming a Director was mentioned at one point, but their accountant seemed reluctant about this.
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