New director, when can dividend be taken

[THEPUMA]

PUMA,

No, I was just considering the current "fair price" for the shares. Let us assume that the shares were originally issued as 100 x £1. Let us also assume the company has retained funds of 50k. Also that it is a bog standard close company. It seems to me a reasonable valuation to put on the 70% shareholding changing hands is 35k. Anything significantly different to this may require justification at a later date and the relationship between the 2 parties may govern whether CGT is due at this stage or not.

Agreed. But the recipient of the shares could also land up with a PAYE liability in respect of a £35K benefit-in-kind (or more if HMRC tried to include the value of the goodwill).

PUMA

[ASB]

Agreed. But the recipient of the shares could also land up with a PAYE liability in respect of a £35K benefit-in-kind (or more if HMRC tried to include the value of the goodwill).

PUMA

Yes, but I believe (probably wrongly) that that would only become an issue if the transaction was not treated as a transfer between spouses and also that it wasn't at a "fair" price.

Interesting you raise goodwill, that is of course also a factor in ascertaining the "fair" price, however on the assumption that it is a standard contractors business undertaking one off contracts then the goodwill is, I think, likely to be zero.

However, a possible scenarios is there may be some support contracts or similar bringing in some income; here there is certainly at least some goodwill value. After all part of the business value is based upon how it generates its revenue.

Ultimately I guess the point is simple. In order to be able to ascertain the best way for the OP to achieve their objectives a lot more needs to be known. This can include the history of the business and the history of the people; not that this is necessarily relevant, but it can be.

Of course you are the accountant not me, so my comments are simply based on what I had to discover at various points and how it affected my specific circumstances.

[THEPUMA]

Yes, but I believe (probably wrongly) that that would only become an issue if the transaction was not treated as a transfer between spouses and also that it wasn't at a "fair" price.

Interesting you raise goodwill, that is of course also a factor in ascertaining the "fair" price, however on the assumption that it is a standard contractors business undertaking one off contracts then the goodwill is, I think, likely to be zero.

However, a possible scenarios is there may be some support contracts or similar bringing in some income; here there is certainly at least some goodwill value. After all part of the business value is based upon how it generates its revenue.

Ultimately I guess the point is simple. In order to be able to ascertain the best way for the OP to achieve their objectives a lot more needs to be known. This can include the history of the business and the history of the people; not that this is necessarily relevant, but it can be.

Of course you are the accountant not me, so my comments are simply based on what I had to discover at various points and how it affected my specific circumstances.

I did put in my original post that the legislation would be unlikely to apply if A and B had a familial relationship or if they were unmarried partners so I think we are in agreement.

I also agree with all of your other points.

PUMA

[northernladuk]

I did put in my original post that the legislation would be unlikely to apply if A and B had a familial relationship or if they were unmarried partners so I think we are in agreement.

I also agree with all of your other points.

PUMA

When you say familial I presume you mean any relationship be it parents, children and so on? The same question for s660. Would the Arctic case have been any different if it had been father/son instead of married couple?

[THEPUMA]

When you say familial I presume you mean any relationship be it parents, children and so on? The same question for s660. Would the Arctic case have been any different if it had been father/son instead of married couple?

Yes linear or by marriage. Essentially, it is simply a question (for employment-related securities purposes) of whether the shares have been received as a result of an employment relationship or not.

The result of the Arctic case would have been different if it were adult son and father AND the dividend paid to the non-fee earner did not fInd its way back to the fee-earner. So, for example, if I had an adult son at university, I could potentially tax=-efficiently give him shares and a dividend in order to help him pay his way through uni but once he had finished uni, if he received a dividend and paid it back to me, that would be ineffective (ie I would be taxed on the dividend).

PUMA