Contractors' Questions: Is my share plan caught by S600?
Contractor's Question: I recently set up a company with £100 of share capital. My intention was to transfer some of the shares to family members who work in the business. Having looked at the company formation documents, I have found that the share capital is one share at a nominal value of £100, rather than the 100 shares at £1 each as I had expected. As only one share has been issued, should I issue more so that the family can have theirs or is it easy to alter the existing share structure? And is there any legislation that potentially restricts what I wish to do?
Expert's Answer: As you wholly own the company, it will be quick and easy to change the share structure. If you wish to sub-divide the shares into 100 of £1 each to enable their transfer, then all you require is a simple resolution signed by you as the sole shareholder. Form SH02 needs to be completed and filed at Companies House. If you need help, an accountant or lawyer will be able to handle it, or you can download a copy of the form from the Companies House website.
You might even wish to have a greater number of shares, which will give you more flexibility. If so, consider further sub-dividing the shares - into 10p or 1p shares, for example. Alternatively, you could issue further shares, which at £100 a share would increase the company's capital significantly. Whether you choose to do this will depend on the share structure you want and the amount of capital you are investing in the company.
Any gift of share will not attract stamp duty but will require a share transfer form, although this will not need to be stamped.
HM Revenue & Customs (HMRC) often attacks tax savings made through income splitting as a result of gifts of shares to family members. HMRC has taken several cases to court on this, most notably the Arctic Systems case, which it lost. Provided that a gift is without condition and not wholly a right to income, you should be outside the scope of an HMRC challenge.
The experts were Jon Sutcliffe, partner and Paul Spindler, technology partner, at chartered accountants Kingston Smith LLP.