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selling a share in your company HELP!!

AlbotAlbot New MemberRegistered Posts: 10
I have been asked by one of my clients who is a Ltd Company !
The company has quite a lot of work on, too much for one person, to take the stress off the director, he has agreed to give half business to his friend, appoint him as a director with 1 share, to share the work load.

The new director is willing to give £10,000 to original director personal bank not ltd company bank for a share in the company. I understand the original Director will have to declare the £10,000 on his own sa Return which I understand would be liable to capital gains tax. although this will be in his anual exemption ??

But since then I have read on the internet about J10 forms (stock Transfer) where he would then pay 0.5% stamp duty ????
There is only 1 share issued in the company SO.....
"does the original director buy another £1 share in his company for £1 (so he has 2) then transfer 1 of the shares to the new director.?

ITs so confussing and really need help ???::crying:

Comments

  • jamesm96jamesm96 Experienced Mentor Registered Posts: 523
    Albot wrote: »
    I have been asked by one of my clients who is a Ltd Company !
    The company has quite a lot of work on, too much for one person, to take the stress off the director, he has agreed to give half business to his friend, appoint him as a director with 1 share, to share the work load.

    The new director is willing to give £10,000 to original director personal bank not ltd company bank for a share in the company. I understand the original Director will have to declare the £10,000 on his own sa Return which I understand would be liable to capital gains tax. although this will be in his anual exemption ??

    But since then I have read on the internet about J10 forms (stock Transfer) where he would then pay 0.5% stamp duty ????
    There is only 1 share issued in the company SO.....
    "does the original director buy another £1 share in his company for £1 (so he has 2) then transfer 1 of the shares to the new director.?

    ITs so confussing and really need help ???::crying:

    So, there's currently only 1 share in issue with a nominal value of £1?

    Surely then (assuming the authorised share capital is more than £1) it would be better to issue 1 more share in the company and allot it to the new shareholder? Then rather than giving £10k to the original shareholder, he gives it to the LTD company: Dr Bank £10k, Cr Share Capital £1, Cr Share Premium £9,999.

    Perhaps I'm over-simplifying the situation but that seems like the up-shot to me, hope it helps!
  • AlbotAlbot New Member Registered Posts: 10
    jamesm96 wrote: »
    So, there's currently only 1 share in issue with a nominal value of £1?

    Surely then (assuming the authorised share capital is more than £1) it would be better to issue 1 more share in the company and allot it to the new shareholder? Then rather than giving £10k to the original shareholder, he gives it to the LTD company: Dr Bank £10k, Cr Share Capital £1, Cr Share Premium £9,999.

    Perhaps I'm over-simplifying the situation but that seems like the up-shot to me, hope it helps!

    Thanks for that but the original Director needs the £10k and thats the only way I can think of doing it, he doesnt mind paying the stamp duty, im just not sure about how I enter it all ??
  • clegganatorclegganator Well-Known Registered Posts: 184
    Ok, how about still give it to the the ltd company, give the new director a different share type, then declare a 10k divi for the original's share type.
  • jamesm96jamesm96 Experienced Mentor Registered Posts: 523
    Albot wrote: »
    Thanks for that but the original Director needs the £10k and thats the only way I can think of doing it, he doesnt mind paying the stamp duty, im just not sure about how I enter it all ??

    Yeah okay, and it's not like he can take the £9,999 as a dividend either because you're not allowed to distribute the Share Premium reserve. (Am I right in thinking the only thing you can really do with a Share Premium is issue bonus shares?)

    Wee in that case there'd be a new share issue to the original shareholder for which he'd presumably pay the nominal value:

    Cr Share Capital £1
    Dr Bank £1


    Then he sells the share privately without any effect on the companies books and shows a £9,999 Capital Gain on his personal tax return.

    You'll then need to do the stock transfer forms that you mention and get them stamped which will require payment of the duty too as they're more than £1k.
  • AlbotAlbot New Member Registered Posts: 10
    Thanks James you declared what I was thnking !!
    i am new member in practice well been going now 2 years, aat helpline not so good, I think anyway, some people who been trading years prob come across this often but this is my first and didnt know who to turn to for advise, I even phoned HMRc and they gave no help at all.

    thanks anyway,

    I think aat should do mentoring ! ive just read the top message
  • DcollinsDcollins Well-Known Registered Posts: 179
    Will also need a sole-director resolution for the change in shareholding. A shareholder's agreement would be advisable too, but this is way beyond the scope of the MIP licence, so refer to a solicitor.

    Just for future reference: the Companies House website has guidelines and info on CA 2006, and I use www.legislation.gov.uk for company and tax law quite a lot. CCH Online is useful too. Companies like Simply Docs have templates for many documents like share/stock transfer forms, minutes and resolutions, and guidance on their completion.
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    Or, new director pays company £1 for issuing a new share and separately gives old director £9,999 as a birthday present..

    Happy days!
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Albot wrote: »
    aat helpline not so good

    I've used the ICAEW technical accountancy helpline provided free to MIPs. I found it very good.
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