Jennifer Adams considers the tax implications when a director or shareholder transfers shares to family members.
The transfer of shares may be for various reasons – usually when the owner decides to retire, or at least reduce their involvement in the business. Alternatively, parents may wish their children to have some of the company’s shares to receive dividends, possibly to help fund further education. The transfer can be by gift or sale, or the company may issue new shares to the family members, reducing the percentage holding of the other shareholders.
Valuation of the gift
However, invariably the transfer will be a gift. The tax position will depend on who is receiving the shares. If to a spouse or civil partner, transfers of assets between married couples and civil partners can take place tax-free. For capital gains tax (CGT) purposes, the gift takes