Transfer of shares in Jersey Company

[Addick]

Hi

I am looking for advice on potential tax implications for a transfer of shares of a private Jersey company. My dad is the 99% shareholder and sole director (the other 1% is owned by the Jersey accountants).

He is looking to transfer the shares to me and my sister (both over 18). My dad is resident is Japan and me and my sister are UK residents.

What, if any, are the tax implications for this transfer? The company was started by my dad and now has net assets of around £200k.

Thanks

[Anthony Nixon]

You mention your and your father’s residence, but your respective domiciles may also be relevant to any tax issues. Have you investigated these?

Has your father been UK resident in the past, and might he be UK resident again in the future? If the answer to both these questions is yes and there are less than five clear tax years between his periods of UK residence, he may be faced with a tax bill on his return to the UK.

Apart from any tax consequences of the shares being transferred to you, I wonder if you have considered what the Jersey company is currently achieving.

I suspect that the cost of maintaining the company in Jersey is not cheap.

The reason for raising the question at this point is that, if you find out, after the shares are transferred to you and your sister, that you want to wind up the company, you might land yourself with UK CGT or income tax issues that would not arise if the company was wound up while the shares are still owned by your father.

I have no knowledge of the Japanese tax issues that your father might face, but, for UK residents, you usually need to have a good reason to keep assets in one of the offshore jurisdictions. Not only are administrative expenses more than they are in the UK but the tax rules are immensely complex and, in some areas, punitive.

There are so many possible issues here, that you really need good professional advice.

Anthony Nixon CTA TEP Solicitor
Partner, Thomas Eggar LLP, Southampton and Chichester
anthony.nixon@thomaseggar.com
023 8083 1224

[Addick]

Thanks for your help Anthony

In answer to your questions, my father has been resident in the UK in the past but does not have the intention to be so again in the future.

The cost of the maintaining the Jersey company is indeed not cheap and my I am not sure of my fathers reasons for domiciling there at this point. However the intention for me and my sister is to keep the company trading and eventually benefit by dividends. I assume this would mean there will be a benefit from remaining in Jersey? (as the company will not pay any corp tax on future profits).

I feared this may be very complicated as you mention and will take your advice on seeking professional help.

Thanks