Client gifting shares - tax and IR35 situation? Client gifting shares - tax and IR35 situation?
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  1. #1

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    Default Client gifting shares - tax and IR35 situation?

    Hi - first post here!

    Hoping somebody might have been in my situation before and can offer some advice.

    One of my clients wants to gift me shares, which is great! However, I really don't understand the tax situation here, and I'm trying to figure out a few points:

    - I know I'll be liable for CGT when I eventually sell the shares, but I'm not too worried about that. What I am concerned about is that these will be considered income, and therefore taxable. The client has valued the shares at £40,000, and I don't want to end up paying tax on that (especially since I'm not sure I could sell them at that valuation at the moment, given the business is a start-up and yet to launch.) I obviously expect to pay tax on any dividends.
    - This gift is not in lieu of payment - so I don't consider renumeration, rather a gift/incentive. The founders are very keen to share success any success the business does get with those who have been involved from the start.
    - I'm concious that this could impact my IR35 status. I maintain a strict boundary on these things to ensure I remain outside of IR35.
    - I don't know whether it would be better for either my tax or IR35 status if I receive shares personally or through my ltd. company.

    Ultimately I do have a call with my accountant to discuss this, but having to wait til Friday to get their time, so hoping I can get an idea of where this conversation will go (especially if I might end up rejecting the offer).

    Thanks in advance!

  2. #2

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    I seem to remember at least two people who opted for being paid shares on here and neither saw a penny.

    How does getting shares affect your IR35 status? Could you explain further?

    Exactly why are they giving your 40ks worth of shares? Maybe the reason why they are doing it will go a long way to answering some of your questions.
    Last edited by northernladuk; 29th April 2019 at 19:45.
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    Getting shares could affect his IR35 status because it isn't that uncommon for employees to be given shares but contractors generally aren't. HMRC would argue it is a strong indicator he's part and parcel, and if he's been involved enough for them to want to give him a £40K share, I'd bet there's other stuff that would fit that description as well. For one thing, he's been there a while, you don't give that much to a guy who's been there six months.

    OP, is the £40K legit, or not? What's the company revenue and profit (approximately) and how big of a percentage are you being given? It may be to their advantage or bolster their ego to put a high value on it but it may be quite detrimental to you.

    A read of this might be helpful: gifting shares | Gannons Solicitors. Obviously, it's dealing with gifts of shares to employees and you aren't one. Some of the accountants who contribute here might be able to help you but I suspect you may be best off paying for some advice. One option might be to agree with them ways to ratchet down the price as absolutely low as can possibly be justified under the most pessimistic scenario and put that price on it, rather than £40K.

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    Quote Originally Posted by northernladuk View Post
    I seem to remember at least two people who opted for being paid shares on here and neither saw a penny.

    How does getting shares affect your IR35 status? Could you explain further?

    Exactly why are they giving your 40ks worth of shares? Maybe the reason why they are doing it will go a long way to answering some of your questions.
    Indeed they will be worth heehaw or a few grand

    Sell them for £40K (no one wants to buy them - big surprise !!!) then ask for advice

    When you get £40K I’ve some magic beans for sale


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    I guess we'll never know.
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    Quote Originally Posted by northernladuk View Post

    How does getting shares affect your IR35 status? Could you explain further?
    Share plans are usually for employees only, what I make of it, his client wants to include him in the employee share plan, which would put him inside IR35, without any doubt

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    Quote Originally Posted by Eirikur View Post
    Share plans are usually for employees only, what I make of it, his client wants to include him in the employee share plan, which would put him inside IR35, without any doubt
    I didn't quite see it like that (an option yes) but with the complete lack of detailed information in his post we are just guessing. I asked him because from what he's put it looks a) decidedly dodgy or b) quite permie as you say. By asking him he may avail us of a little more detail when he's explaining his thinking. Either way it needed a LOT more clarification before we could give anything near a reasonable answer but I'd be willing to bet the whole situation is a proper can of worms which is exactly why the OP didn't go in to the detail and hasn't been back.
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    Quote Originally Posted by spasmos View Post
    Hi - first post here!

    Hoping somebody might have been in my situation before and can offer some advice.

    One of my clients wants to gift me shares, which is great! However, I really don't understand the tax situation here, and I'm trying to figure out a few points:

    - I know I'll be liable for CGT when I eventually sell the shares, but I'm not too worried about that. What I am concerned about is that these will be considered income, and therefore taxable. The client has valued the shares at £40,000, and I don't want to end up paying tax on that (especially since I'm not sure I could sell them at that valuation at the moment, given the business is a start-up and yet to launch.) I obviously expect to pay tax on any dividends.
    - This gift is not in lieu of payment - so I don't consider renumeration, rather a gift/incentive. The founders are very keen to share success any success the business does get with those who have been involved from the start.
    - I'm concious that this could impact my IR35 status. I maintain a strict boundary on these things to ensure I remain outside of IR35.
    - I don't know whether it would be better for either my tax or IR35 status if I receive shares personally or through my ltd. company.

    Ultimately I do have a call with my accountant to discuss this, but having to wait til Friday to get their time, so hoping I can get an idea of where this conversation will go (especially if I might end up rejecting the offer).

    Thanks in advance!
    I don't do IR35 and so you will have to ask someone about those aspects.

    If you get the shares personally though, your company will have to operate PAYE/NIC on the best estimate that your company can make on the value of the shares you get. Whether that value is £40,000 or not is another story. If there are restrictions on the shares then the position gets more complicated.

    As far as share plans being for employees, yes often they are. But it is relatively common to give suppliers shares or share options.

  9. #9

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    Quote Originally Posted by spasmos View Post
    ...the business is a start-up and yet to launch...
    This is all that I need to know in order to tell the "business" to FRO.

    Get paid in cash for the services that you supply to any such business... unless you see it as a hobby and you're doing the work for kicks and the unlikely future payback.
    ---

    Former member of IPSE.

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    Quote Originally Posted by wattaj View Post

    Quote Originally Posted by spasmos View Post
    the business is a start-up and yet to launch
    This is all that I need to know in order to tell the "business" to FRO.
    When you decide you know all you need to know, you can make a fool of yourself by missing something pretty important like:
    Quote Originally Posted by spasmos View Post
    - This gift is not in lieu of payment - so I don't consider renumeration, rather a gift/incentive.

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