Gifting shares to a non-fee earner, who isn’t a spouse is a problem.
As this is a share transfer the other way I can’t see any reason why £1 per share would ever be questioned by HMRC.
I there is a risk it’s more about if HMRC want to see the tax the OPs brother was paying, and whether they’d consider that a settlement.
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Previously on "Establishing fair value in a one man band company"
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Originally posted by Craig@Clarity View PostI imagine you saying this, then downing your drink and ordering another one without hesitation as you continue talking about why radiators need bleeding lol
You joke but the fastest way to loose friends and family is when money is involved. His brother has had a free income for zero work no one here knows how that conversation is going to go down.
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Originally posted by BlueSharp View PostClose the business and set another one up.
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Assuming there is no shareholders agreement in place which states what value you can buy them back at, the first and second question I'd be asking is how much does he want for them and how much are you will to pay for them to become 100% shareholder. If he's not bothered and looking to gift the shares back to you, I'd probably say do a stock transfer for £50 (if he holds 50 shares at £1 each). If he's not done anything for the business, I would say that's a fair value! Just make sure you have the minutes written up, stock transfer form signed and the next confirmation statement updated to reflect the correct shareholding and PSC.
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If you were to base it off of net book value, with perhaps a reduction in value due to it not being a controlling share, I would imagine that would probably be reasonable. It's perfectly fine for him to gift the shares back to you - CGT would be based on market value anyway. Unless his percentage is worth more than his CGT allowance, he will have no tax to pay and no gain to report.
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Originally posted by ittony View PostThere's very little cash or assets so if we're allowed to value it that way then that's fine, as long as HMRC are likely to see it the same way.
If you were talking several million pounds in assets they might want to quibble over this or that.
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Originally posted by malvolio View PostYour last set of book will give you a workable net book value - basically what's in the bank plus fixed assets. If that's terrifyingly high, off to buy back the shares at something nice and round, like £100 the lot. If he's done no real work on your behalf, and had some level of free income, he hasn't really got much to complain about.
As for tax, that's his problem. YourCo is simply buying something.
I hadn't considered the company buying back the shares instead of me, sounds interesting, if complicated. Basically, whether its gifting or buying, neither of us care about the amount of money that has to change hands, we just want to make it painless and beyond reproach.
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Originally posted by northernladuk View PostNot really. That would indicate you either do a dividend waiver or have Alphabet shares, neither of which are a good idea.
Why doesn't he just sell you them back for a £1 and have done?
Did your accountant provide any suggestions?
As an alternative to gifting I'm more than happy to pay any £x amount for the shares and have done with it, I just don't want the tax man to be able to give either of us grief because they think we've under valued the company.
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Your last set of book will give you a workable net book value - basically what's in the bank plus fixed assets. If that's terrifyingly high, off to buy back the shares at something nice and round, like £100 the lot. If he's done no real work on your behalf, and had some level of free income, he hasn't really got much to complain about.
As for tax, that's his problem. YourCo is simply buying something.
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Originally posted by ittony View PostClearly I could arrange things so that the minority shareholder received nothing should I be so inclined.
Why doesn't he just sell you them back for a £1 and have done?
Did your accountant provide any suggestions?
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Establishing fair value in a one man band company
When I formed the company through which I freelance, I allocated a few percent to my brother who intended to help out a bit with running it. As it turns out he hasn't had much to do with it, so we've both decided its not really fair that he should continue to receive this portion of the dividends in perpetuity and so he wants to gift his entire holding to me (I will then own 100%).
My question is, for the purposes of tax, how can we establish a fair value for these shares given that the dividends they receive are entirely derived from my freelancing earnings and are completely dependent on how much of that I choose to take as salary?
One might attempt to value it in terms of the earnings per share over the last few years, but I can't imagine a random third party wanting to pay a typical P/E ratio for the shares on the assumption things would continue in the same way. Clearly I could arrange things so that the minority shareholder received nothing should I be so inclined.Tags: None
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