If you run a limited company and you are thinking of introducing a new shareholder, then you may find this trickier than you had anticipated.
Shares issued to an employee must be paid for at the current market value if you want to avoid any tax implications – but you might not know what that market value is. It also presents complications because the current value may be a lot higher than the current shareholders and the employee were expecting to contribute for the shareholding.
The temptation is to pay less than the current market value, which is an option, but the discounted rate will be subject to Income Tax and potentially National Insurance.
There are a few ways to overcome this, such as:
This new class of share would then have nominal value only and additional amounts paid would be credited to the share premium account. There is one drawback to this – if you are expecting several new incoming shareholders over the year, this will create ‘alphabet shares’, something HMRC is not overly fond of.
In which case, should there be another incoming shareholder in the pipeline, you may wish to consider bringing them in sooner such that the value would still stand, and therefore the same new class of share could be issued to that person.
Each case is different and it is recommended that you seek appropriate advice from the tax advisers at Wilkins Kennedy before making any arrangements. Contact us for more information.
VAT registered businesses have been receiving letters from HMRC recommending that an ‘EORI’ number (Economic Operator Registration and Identification number) should be applied for by 29 March 2019, in preparation for Brexit..
In his speech yesterday, Chancellor Philip Hammond demonstrated his commitment to the principle of the Spring Statement as a low-key event, at least in terms of tax and public spending announcements.
With the 5 April rushing towards us and heralding the start of a new income tax year, some changes to bear in mind going forward.
There’s no better time to be nice to staff and customers than at Christmas. But the tax man is less generous than Santa and there are certain clauses you need to be aware of before you start popping £50 notes into envelopes to hand out over mulled wine round the office tree.
See our quick flow chart to check if you are ready for MTD.
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