Share splitting with non-married Partner

[stephenwil]

Hi,
I'm wanting to gift shares to my partner (we aren't married at the moment), make them a director and give them a salary to reflect some of the work they do.

Current advice from the accounts is to gift the shares, but make a note of the valuation and claim hold-over relief for now.
However, I'm struggling to come up with a way to value the company. The retained profit is very low at the moment, and typical annual income for the company is around £80K, with most of it being taken as dividends, hence the idea to share-split.

Seems a very cumbersome process, and not a lot of guidance, especially if the valuation is then debated or reviewed at a later date and my partner is hit with a large capital gains tax bill.

Any advice?

Thanks

[stek]

Don’t do it.

[chopper]

Terrible idea, if you aren't married.

If you split shares and therefore split dividends, then the taxman would expect the tax treatment of those dividends to be as if all the dividends were paid to you.

This only goes away when married, because the taxman literally feels sorry for you.

Your partner does not need to be a director or a part shareholder in order to receive a small salary for services rendered.

[northernladuk]

How long have you been together? I'd say don't give half your company to someone you aren't married to.or at least have been together a long time. You'll have to keep paying her half your money when you split up. We see it plenty on here.

If you want to kid yourself she does 8k of work for the company then fill your boots with that one.

[malvolio]

This only works between spouses - see the Arctic Systems judgement for the detailed reasons. Your partner can buy shares and can take on a salaried role as a director, but it won't help your tax position in the slightest and could be challenged by HMRC, especially if the new shareholder's input to the company is disproportionate to the rewards gained. HMRC would probably rightly conclude this was an artificial arrangement to avoid tax and treat all your partner's income as your own and tax you accordingly.

So, as the man said, don't.

I would also be more worried by your accountants not knowing this and giving you bad advice that also conflicts with case law.

[tarbera]

good advice

Don’t do it.

and dont get married

[TonyF]

Start a brand new company and split the shares accordingly when you create the company. That way it's very easy to determine the valuation of the company - it's £1 or whatever the share capital is.

Though I'd be very wary of splitting my company with someone who I wasn't married to, unless they were earning in proportion to their shareholding as well.

[Willapp]

and dont get married

Amen.

[stephenwil]

Start a brand new company and split the shares accordingly when you create the company. That way it's very easy to determine the valuation of the company - it's £1 or whatever the share capital is.

Though I'd be very wary of splitting my company with someone who I wasn't married to, unless they were earning in proportion to their shareholding as well.

Wouldn't that be quite difficult to do if a contract is inplace for the current company to provide services etc?

[gnarledcontractor]

and dont get married

+1