Adding a foreign shareholder

[Paralytic]

I'm surprised no-one has said this yet, but.... have you asked your accountant?

"Gifting" shares can be complex business when a non-spouse in involved, and can be a bit of a red flag if you're ever investigated.

On the face of it, it seems you want to give your friend some money, but rather than pay yourself dividends (and pay tax on those) and give him money, you're giving him shares so he gets dividends he won't pay tax on, therefore bypassing the need to pay tax on those dividends.

To me, that sounds like HMRC could look to include it under GAAR rules.

[Lance]

Oh dear, looks like I've caused a bit of a mess with this thread, reading your replies made me laugh, let's see if I can clear things up with one reply

1) this is a gift to a friend - (as I said before) I suppose this may be hard to believe, but don't know how much clearer to be, I'm sure some of us have friends that are like family?
2) this person does not have any shares today at this moment
3) I will give this person 50% share as shareholder
4) This person is not, never had been my lover, we have never had any romantic or sexual relations or activity etc
5) This person does not have any compromising information on me or nudes of me ie they are not blackmailing me in any way
6) I do not have a partner or ever had children ie not hiding this from someone/family
7) This person will not give me ANYTHING in return for the share ie cash, gift, sexual favours, time, work, knowledge, advice, contacts, introductions to someone etc
8) I had not made my mind up before coming here, so far I have not heard anything wrong with it, so it's giving me the impression that there is nothing wrong with it, but perhaps people are waiting for more information hence the creation of this reply
9) I don't how this person will use the money, it's up to them, they could blow it on a night in Vegas, or give it to charity, who knows
10) I'm happy to pay all taxes
11) If I'm just thinking about it, perhaps this is tax evasion since this is gift to a friend, so I guess I'm creating a loophole in that sense? it's a glorified version of giving gift to friend,
12) I guess each share will be of the same value
13) I think right now the company only has one share, which is mine, but want to add them as a shareholder and let them take 50% dividends each month

Let me know if I missed anything or you need more info!

we're getting somewhere now....
What tax residency is your friend in? there may be tax due on the gift
What happens when you die?
What happens when your friend dies?
As your friend now owns 50% of the company you might be stuck if/when they die. You need to make provision in a shareholders agreement (this is not the law this is sensible advice).

Do both of you know what it means to be a shareholder of a private limited company? Particularly one where the voting rights are split equally.

[Lance]

I'm surprised no-one has said this yet, but.... have you asked your accountant?

"Gifting" shares can be complex to a non-spouse, and its a bit of a red flag if your ever investigated.

you're

[kazh]

I'm surprised no-one has said this yet, but.... have you asked your accountant?

"Gifting" shares can be complex business when a non-spouse in involved, and can be a bit of a red flag if you're ever investigated.

On the face of it, it seems you want to give your friend some money, but rather than pay yourself dividends (and pay tax on those) and give him money, you're giving him shares so he gets dividends he won't pay tax on, therefore bypassing the need to pay tax on those dividends.

To me, that sounds like HMRC could look to include it under GAAR rules.

My accountant said it should be fine but wanted to double check. Thanks for your reply, I understand, but then I am confused, because wouldn't every shareholder who is a non-spouse classed as gifting? if not why would me friend be?

[Lance]

My accountant said it should be fine but wanted to double check. Thanks for your reply, I understand, but then I am confused, because wouldn't every shareholder who is a non-spouse classed as gifting? if not why would me friend be?

even a spouse would count as having the shares gifted if they were, well gifted.
Me. I sold my shares to my wife. £1 and a BJ each

your friend could buy the shares. If (s)he pays fair market value then it's not a gift.

[kazh]

we're getting somewhere now....
What tax residency is your friend in? there may be tax due on the gift
What happens when you die?
What happens when your friend dies?
As your friend now owns 50% of the company you might be stuck if/when they die. You need to make provision in a shareholders agreement (this is not the law this is sensible advice).

Do both of you know what it means to be a shareholder of a private limited company? Particularly one where the voting rights are split equally.

my friend is in France,
I haven't sorted out what happens when I die or my friend dies, thanks for the advice on making a shareholder agreement, will do that!
yes happy with equal split of votes!

[kazh]

even a spouse would count as having the shares gifted if they were, well gifted.
Me. I sold my shares to my wife. £1 and a BJ each

your friend could buy the shares. If (s)he pays fair market value then it's not a gift.

Ah I got it! Since they are not buying the shares HMRC won't be happy,

[Lance]

my friend is in France,
I haven't sorted out what happens when I die or my friend dies, thanks for the advice on making a shareholder agreement, will do that!
yes happy with equal split of votes!

on dividends
Taxation of dividends | Investors & Shareholders | Bank BNP Paribas.

on gifts
Gifts Tax in France
nothing about gifts to non-family members in that article

But over here it tells you that UK tax is involved as well
The Gift of Giving | UK resident to a French resident | UK Tax applies

All that assumes that France will consider 50% of a company as a gift and not something more sinister.
You need professional (not a UK accountant) advice

[Lance]

Ah I got it! Since they are not buying the shares HMRC won't be happy,

That's not what I said. Since they are not buying the shares they are a 'gift'.
What that means is complex and nuanced.

[kazh]

Oh man, so hard to just give someone money without such an unfair tax!