Limited company shares 'B' Class

Poodle

Hi,

Not what I normally do but here goes.

Client wants to give part ownership of his company to his 6 year old son. Possibly in trust? I have not done anything like this before and have no experience with this and so will probably refer to a local CA but was just wondering how this worked.

I also thought, is it not possible for the company to issue a 'B' class share, for the son, with no voting rights but with an option to convert into 1 OSC at some unspecified time in the future. The 'board' could then declare a dividend on the 'B' class share independent to the Dads OSC holding, that would cover the sons PA's each year. Dad could either put this in an ISA in the sons name or hold in a joint deposit account with his son until he is 18.

Input would be appreciated with regards to the logistics of doing this, IE how do you do it.

Any potential problems, pitfalls.

Company has balance sheet value <£10,000 so would there have to be a consideration payment for the issue.

What tax implications would there be for the father, could this be deemed as his income if put into a joint account or the fact that the payment could be made to a connected person that is a minor?

Thanking you for your time

Monsoon

Poodle wrote: »

What tax implications would there be for the father, could this be deemed as his income if put into a joint account or the fact that the payment could be made to a connected person that is a minor?

That's my gut feeling but this kind of thing is outside my expertise, I'm sure there's some clever trust or something that can avoid it but my understanding is that this kind of arrangement would be taxable on the parent unless you do something clever!

Poodle

Thanks M for your answer,

Anyone else anything ?

Guest

Yes would be deemed fathers income.
With a trust it possibly could work but overall this is a gift of income not a gift of capital, done purely to avoid tax via alphabet shares. The same principal as if a small company issued Ordinary A-Z shares to each of the 26 staff to avoid NI.