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Share transfers to spouse
Share transfers to spouse

Are you thinking of transferring shares to a spouse?

Steven Anderson avatar
Written by Steven Anderson
Updated over a week ago

Are you thinking about bringing your partner on board to the company for optimum tax efficiency?

In terms of re-organising your company structure, there are a few pieces of important information to be aware of:

-Transfers between spouses will have no capital gains tax to pay. This is because the transaction is deemed to take place at a no gain/no loss basis, meaning that the initial cost is transferred across to the new owner of the shares.

- We would tend to suggest an underlying commercial basis for any share distribution however HMRC are unlikely to investigate and challenge spousal share transfers.

-A commercial basis could be looking at how much income an individual is generating for the company, how much internal bookkeeping/administration they are doing or just how much they are paying for the shares. It is best practice to limit your spouse’s shareholding to 50% unless they will be carrying out the majority of the work through the company. You may want to consider keeping a majority shareholding (so 51% or more).

- A given shareholder must hold at least 75% of the overall shareholding in order to overrule the votes of other shareholders. This is important for "special resolution" which are significant company decisions like closing or changing name.

- Shares carry voting rights and represent ownership in your company.

- Once shares are transferred they can't just be "taken" back as they will be the property of the new owner - they must be given up actively.

- Frequent share changes can be frowned upon by HMRC.

You have a couple of options when it comes to creating the additional shares required to arrive at your desired share-split as you can either sub-divide your existing shares or issue brand new shares.

Option 1: Sub-division

Sub-division works by splitting your existing shares into more shares with lower individual nominal values. So for example:

You have 10 shares at £1 each which you then split into 100 shares at £0.1 each.

The overall nominal value of the shares do not change but having more shares to be able to transfer between parties can give you increased flexibility when it comes to organising your share structure.

This option can have administrative advantages compared to issuing more shares as it less likely to trigger an employment related securities filing to be needed with HMRC (more detail is provided on this below).

For a sub-division to occur a form SH02 must be filed by post with Companies House. We will fill this out for you based on your desired share changes.

Option 2: Issuing new shares

This works by creating new shares in the company which carry the same nominal value as the existing shares. With this option you can simply increase the share capital from being 1 share at £1 to 100 shares at £1 each.

This can be actioned by us completing a SH01 form online.

This option is more likely to result in an employment related securities submission needing to be made to HMRC.

An employment related securities form (ERS) may be required depending on the type and nature of the transaction taking place. This form is used to report any shares that have been received by a company employee/director that have been received as a direct result of the employment.

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