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Where Taxpayers and Advisers Meet

Buying shares off a friend (tax efficient gift?)

ZeroWorld
Posts:3
Joined:Tue Jan 04, 2022 3:32 pm
Buying shares off a friend (tax efficient gift?)

Postby ZeroWorld » Tue Jan 04, 2022 3:40 pm

Hey There,

A friend (Bill) and I are looking at buying into another friend's (Dave) business, partly because we think he's building some interesting technology, but mainly because it seems like a tax efficient way to give him some money (he helped us out a little while ago on our business, so we want to 'repay' him).

My questions to the team here is:

- If we spent £1mn buying shares off of Dave in his company, what would his taxation be on that £1mn? I assume he will pay Capital Gains Tax, or maybe Entrepreneurs Relief on the £1mn proceeds from his shares?
- Is this legal/allowed? It's effectively a tax efficient way to give Dave money vs just gifting it to him. (He would be paying CGT/ER vs Gift Tax)

We would look to draw up a proper share purchase agreement, but I wanted to check with others on here on whether any issues could potentially arise from this?

Many thanks in advance

someone
Posts:544
Joined:Mon Feb 13, 2017 10:09 am

Re: Buying shares off a friend (tax efficient gift?)

Postby someone » Thu Jan 06, 2022 7:31 pm

Seriously? You're contemplating investing 1MM and you're worried about the tax position of the person you're buying from?

I'd get professional advice on what I should be doing to optimize my tax position when I want to sell or take income from the investment. No doubt any accountant would advise the seller to get advice too but they might make suggestions for you to pass on (but possibly not as I can imagine minimising the sellers tax now might maximise yours later)


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