Dividend query

[timberwolf]

Hi everyone,

I am the owner/sole director of my very small limited company and take £8060 as salary with the rest paid in dividends.
As I only have a £5000 annual allowance for dividends before paying tax, I was considering making my partner a shareholder as on incorporation we did not issue all the shares.
I have no idea how to go about doing this. Would it be with Companies House and if so what forms would I need?
I would be grateful if anyone has any ideas.
Many thanks in advance.
tw

[LozaACCS]

There are a couple of options:
If you hold more than one share you can gift one or more to your partner, nothing needs to be done immediately at Companies House but the next Confirmation Statement will need to record the stock transfer.
The Stock Transfer Form can be downloaded from the internet by a simple google search, you could ask an accountant / lawyer to complete it or have a go yourself.
Alternatively the company can issue a new share to your partner(it will still need to be recorded on the confirmation statement), the Companies House website lists all the necessary forms to do it on line and will guide you through it if you call them.

[timberwolf]

Many thanks for the information. It was very helpful.

[SteLacca]

Is your partner otherwise connected with the company (i.e. an office holder or employee)? If so, and depending on the value of the shares, you'll also need to consider, if the shares are not to be paid for, then the issue of new shares will give rise to a taxable benefit in kind on your partner.

[LozaACCS]

I think in this case any tax charge is unlikely but it is an interesting point worthy of discussion.
Income Tax.
If the partner subscribed for new shares and they were issued for no consideration then what value would be placed on those shares, let us assume there are currently 100 shares worth 5K, ie £50 each ( held by the OP)
Assume 1 share is issued to the partner for no consideration.
To be a P11D benefit the ER would need to transfer an asset to an employee, it has not done so because it has not ever owned the asset.
So IT would need to be charged under PAYE (&NI) on the value of the share issued to the EE, what then would be the value of that share, I would contend it would be £1 because that is the value to the company of that share.
It could not be £50 because the company does not own those shares so could not transfer them.
The security would also avoid being an Employment Related Security by virtue of S421B(3ab)ITEPA 2003
If the share were transferred from the OP to the partner then IT would not be in point.
CGT
If the partner subscribed for 1 new share for no consideration the market value of that share would be £1.
If the OP transferred the share then its value would be £50, any gain is likely to be be covered by the OP,s Annual Exemption.
IHT
Strictly speaking a company cannot make a transfer of value, although it is a person in law it not a natural person,and the rules at S94 IHTA 1984 can apportion the transfer of value to the OP, the transfer of value would be the loss to the donor, ie the value of 100 shares worth 5K less the value of 100 shares after issuing 1 new share, this would obviously depend on the rights attaching to the new share, the TOV would be a PET, given a NRB of 325K it is most unlikely to be an issue here.

[bd6759]

The value of the share is not £1. Market value means the amount that a person might pay for it. It won't be as much as £50, but will be more than £1. The s421A(3) exemption would not apply to subscibed shares.

Also need to consider Part 5 Chapter 5 ITTOIA. There will be an element of bounty to this arrangement unless the full market value was paid.

[LozaACCS]

The assertion that the share is worth more than £1 needs to be on a stronger foundation than your desire that it ought to be, so go ahead, tell us all how the value is calculated, (use hypothetical figures if you wish) and the legislation that supports that calculation.

[bd6759]

You suggested that that 10a0 shares are worth £5000: £50 each. If a new share is issued, there will be 101 shares worth £5000: £49.50 each. But a single share is never worth its proportional value of the assets because the holder cannot exert any control. The nominal value of the share is £1. The market value is somewhere between £1 and £49.50.

Market value is the value that any person would be willing to pay for it in the open market. Legislation does not dictate this. You seem to get confused if there is no precise legislative provision: and often more confused when you find one.

[LozaACCS]

I said at the outset that the post was worthy of discussion, a concept you do not recognise, your posts are either annoyingly self opinionated or downright rude, I think it is best left to the OP and others to judge the responses.
As far as tax law is concerned, I can say that I have been tested at the highest level by bodies more able than you, and have the qualifications to confirm it, can you make a similar claim

[bd6759]

your posts are either annoyingly self opinionated or downright rude,

You don't do irony, do you?

I can say that I have been tested at the highest level by bodies more able than you, and have the qualifications to confirm it

The benefit of having my clearly inferior qualifactions is that I know that I can't always be right, and I can accept being corrected by another contributer's contribution.