Transfer of company shares on death

(yeah, I wish), how is this treated for inheritance tax purposes, as the shares are only valued at 1 each.

The shares used to be valued at 1 when you registered the company, but they are now worth the value of the properties and would form part of your estate on death.

You cannot transfer a share while you are alive without paying CGT. You are stuck and must tread carefully! Take advice from a good accountant/lawyer if money is at stake.

You need to make a will - but remember: "where there's a will, there's a relative".

Yours faithfully,

John Aidiniantz

specifically

In message , Socrates writes

Yes you can. It depends on the figures involved and the time the shares have been owned and to whom the shares are transferred.

TRUE!

In message , Shane Cook writes

No.

Yes.

No, they are not valued at £1 each. That is just the 'nominal' value which you may, or may not, have paid for them.,

No, but you could transfer some of the shares to your wife.

There are a number of ways round this depending on your own circs and requirements, but you could start gifting some of the shares to your children and hope that you live more than 7 years after the last gift, transfer some to your wife, write a will leaving a sum equivalent to the Nil rate Band to IHT on the date of death to a Trust and all other assets to your wife who gives an IOU for the NRB to the Trust which is empowered to hold that IOU as its sole asset. Etc., etc.,

Here is a link I found to all issues regarding IHT, for anyone else who's interested.

Bitstring , from the wonderful person Socrates said

A beneficiary certainly, not necessarily a relative. (I'm thinking 'cat', 'cleaner', 'charity', and sundry other options which still beat giving it to HMG).

have been owned and to whom the shares are transferred.

Hello - my statement refers to the poster who holds shares worth a million.

The time factor is irrelevant - if the shares have acquired a value since their purchase, then CGT is calculated on that value, although I presume you are referring to taper relief or some other time-related reducton offered by the Treasury.

In a nutshell, the poster and every other taxpayer cannot give away their assets without incurring a Capital Gains Tax liability, which is charged on the diminution in wealth as well as a gain.

So if you have a million yacht or Cartier watch, you cannot just give it away without being taxed!

This seems unfair if you have earnt money to purchase an item and have already been taxed on those earnings.

One would think that one could be free to give an item away, or even to destroy it, without any further tax liability.

There may be some exceptions if for example all the wealth/proceeds is donated to a charity - but that is probably the only exception? - and not many people want to do that.

Yours faithfully,

John Aidiniantz

In message , Socrates writes

Hello - you said 'a share', you have no knowledge of the number of shares in issue and therefore have no knowledge of the amount of the gain per share. It could be quite feasible to sell one share and suffer no CGT.

Er, yes, youve got it! possibly also indexation depending on dates. BTW its the Inland Revenue, not the Treasury.

Balderdash, you may certainly obtain a Capital Gain, but that does not necessarily mean you suffer a Capital Gains Tax liability.

Of course you can, what if you paid £1.1m for it?

Agreed.

Well that is certainly possible.

For CGT purposes? Are you sure?

Let me ask a slightly different question. Supposing I setup a NEW company and issue one share to myself, one to my wife and one to my daughter before the company has any assets. I then purchase property with the company. What happens on the death of either myself of my wife with regard to IHT? It's my understanding that the share that myself or my wife owned, prior to passing away, now becomes part of the estate, and thus would be worth one third the value of the property company at that particular person's death. Should the share be passed either to wife or my daughter, it would be subject to IHT, should it's value plus any other estate be more than 263K. Is this correct and if so, is there a better way to pass the family business onto the next generation, and then so on and so forth, without it being subject to IHT on each new generation?

Am I correct in thinking that the shares in the property company should not be held any individual, ie by anyone who would die, but by some other structure, such as another company, a trust or something which doesn't 'die' as such?

Kind Regards, Shane Cook.

"john boyle" wrote

If taxing a gain in value of an asset is "unfair", then surely it must also be "unfair" to tax interest received in a bank a/c ........??

This also extends to rent received on property, etc etc.

Your own link gives you:

"Anything that you give during your lifetime or leave on your death to your spouse is completely free of inheritance tax, but both of you must be domiciled in the UK."

In message , Tim writes

Yes, in my view all taxation is unfair top some extent, but weve just got to live with it!.

john boyle" wrote

shares in issue and therefore have no knowledge of the amount of the gain per share. It could be quite feasible to sell one share and suffer no CGT.

Hello - the poster is the sole shareholder with an assumed shareholding worth 1 million.

In this context, the number of shares in issue is not relevant, as the shareholding would be valued at this level whatever number of shares have been issued - whether 2 or 100. If 2 shares have been issued, then each share would be worth 500,000 - so it would not be prudent to give away even one share because that would give rise to an immediate GCT which I think would be payable within 9 months of the share transaction.

The Inland Revenue banks its money with The Office of Paymaster General which is under the Treasury, as far as I am aware. The Revenue is just a collecting agent or more like a glorified bailiff working on behalf of the Treasury. The Chancellor of the Exchequer is the Minister of the Treasury Department which ultimately receives the money.

Yours faithfully,

John Aidiniantz

"in message news: snipped-for-privacy@johnboyle1.demon.co.uk...

In message , Socrates writes

Hello- and if there were 1 million shares issued, they would be worth £1 each. This could have occurred if there had been a share split. You said "You cannot transfer a share while you are alive without paying CGT" I am saying you can because one share could easily be sold without incurring any CGT.

Its the Treasury who end up with the dosh, but they dont make the rules, the IR does. You said " although I presume you are referring to taper relief or some other time-related reducton offered by the Treasury." The Treasury offers no such reduction, the Inland Revenue does.

each. This could have occurred if there had been a share split.

Correct - but a most unlikley scenario in the real world - I can't think what the size of the Company's Share Register would be with 1 million shares issued!

There would be no earthly reason to divide up a private limited company's shares into 1 million shares, and for most practical purposes 100 shares is normally sufficient for dividing up between family members.

The time to divide up company shares is at the beginning of trading before they have acquired any value - once trading begins and the shares are deemed to have acquired a value, then it is not possible simply to transfer them to others or to a trust without ultimately avoiding capital gains tax in some form or other.

The Inland Revenue have come up with a few schemes involving reliefs and deferred tax, but these are just tweaks for patching up a haphazard regime for collecting tax.

A good accountant would be the best person to advise.

Yours faithfully,

John Aidiniantz

Huh? Of course it would be part of his estate. It wouldn't be "transferred automatically" in the same sense as "joint tenants" ownership, but see below.

It's never a bad idea to make a will, but if his wife and daughter are his only close relatives, then under intestacy rules they *would* inherit all his estate, so strictly there would be no need to make a will purely in order to ensure they got his company, so long as he's not fussed as to the proportions.

In message , Socrates writes

Oh I agree entirely, I was being very pedantic!

Well it need be no bigger than with just one share issued, if they were all issued to the same person.

Oh yes there would, to avoid CGT as I have already described for example. In fact I know of a few examples were private companies have done this and passed small parcels of shares to family members on an annual basis to avoid CGT and to keep within annual IHT limits.

Yes, often with only one issued.

Youve lost me there.

"Socrates" wrote

Perhaps just a single page, but with a number which has six zeroes?!! :-)

I believe the situation is: there is no CGT on death so 'giving' them away by your will does not attract CGT. There will be inheritence tax if you leave them to your daughter, but not if you leave them to your wife.

Robert

slightly off on a tangent, but a bit relevant:

We have a small amount of let property. If I die or decide to sell it while I'm not dead, I will have to pay a lot of tax. So I am toying with the idea of splitting it into say 100 shares, and then giving the optimal tax free number of shares each year to my children until they're able to fully utilise their individual CGT alowances. That way, along with my wife and offspring, we can offset 5 CGT allowances against each house sale.

I have some homework to do... I don't know if a limited company would be necessary, or advantageous.

(This is based on things suggested by people on this board)

Tony

P.S. You can inherit an asset, but not a debt, so it makes sense to die in debt(?)