Captial Gains on transfer of shares

heleng27

Bit of a long and complicated story so please bare with me but could really do with some advice.

My ex husband worked with a very good friend who had a sole trader business. He decided to go ltd and offered ex the opportunity to be a director. Because at the time I wasn't working the accountant suggested myself and other mans wife become directors therefore utilising the tax allowances, dividends, etc.

To be honest, and stupidly I did not know how the system really works. All was fine until 3 years on, husband leaves me.

I am taken off as Director as a company and now in receipt of HB, IS, etc

I have now received a letter from the company accountant saying that I now have to pay £1700 in capital gains, this is after taking off personal tax allowance, entrepreneurs tax, cg exemption, etc.

The thing is I never actually paid any money originally for any shares when the ltd company was started, nor have a received any money in the transfer of shares back to ex's partner.

No one advised me that this would be the case. How do I stand, will this effect my benefits even though there is no money involved?

Please can someone advise me, I hate the fact I have been so nieve.

Thanks

noh

If you were a shareholder in the company only you could have authorised the transfer of those shares to another party. Thereby creating a disposal for CGT purposes.
Did you do so?

pjclar02

Hello there

I don't quite understand why their accountant would write to you and tell you that you have a liability to capital gains tax. Has the company been sold without your knowledge? If so, and if you have a capital gains liability, then presumably you were also a shareholder and therefore you are entitled to some of the proceeds.

I think you may need to show this letter to a professional - as it makes little sense without the context offered by the rest of the letter.....

heleng27

Because my husband and I separated. The man who started the company wanted the shares back. I just signed a form to transfer the shares. But I did not know the consequences of capital gains tax. I guess because I didn't pay anything to become a shareholder neither have I received any money for the transfer of shares I didn't realise there were tax consequences.

I have nothing to do with anyone at the company so thats why I have received the letter from the accountant.

The company is very much still up and running

chrismac1

Also, how can this accountant possibly know that you have a liability? Does he or she have access to all your savings and investments? You could have losses brought forward, chargeable losses in the current year, etc. which cancel out this supposed CGT bill.

Very strange this. Unless he or she was also at some stage your accountant, it seems to me this one crosses the line...I like to keep out of these family bust-ups as much as poss!

pjclar02

Indeed - I agree with Chrismac - this is very odd. If you did not receive any money for the shares then you will be unlikely to have a capital gains tax liability.

If you want the letter checking out then send me a PM and I will let you have my email address - I will look over it for you if it would be helpful (free of charge, of course)

heleng27

chrismac1 wrote: »

Also, how can this accountant possibly know that you have a liability? Does he or she have access to all your savings and investments? You could have losses brought forward, chargeable losses in the current year, etc. which cancel out this supposed CGT bill.

Very strange this. Unless he or she was also at some stage your accountant, it seems to me this one crosses the line...I like to keep out of these family bust-ups as much as poss!

I see what you saying. He has done my self assessment forms in the past, but like you say he doesn't know about any other earning, savings, etc for this year. Although I have no savings no other earnings other than the benefits that I am receipt of

Does anyone know if this could affect the benefits if no many has been exchanged?

noh

pjclar02 wrote: »

Indeed - I agree with Chrismac - this is very odd. If you did not receive any money for the shares then you will be unlikely to have a capital gains tax liability.

If you want the letter checking out then send me a PM and I will let you have my email address - I will look over it for you if it would be helpful (free of charge, of course)

It does not matter whether or not any money has been received. The transfer of the shares is a disposal for CGT purposes.
http://www.hmrc.gov.uk/cgt/shares/basics.htm#7

pjclar02

noh wrote: »

It does not matter whether or not any money has been received. The transfer of the shares is a disposal for CGT purposes.
http://www.hmrc.gov.uk/cgt/shares/basics.htm#7

Yes - but if the consideration is "nil" which is what the OP is suggesting has been received - then it is unlikely that any capital gains tax will be payable.

In what circumstance are you thinking the OP would have a CGT liability of £1,700 when she has not received any sales proceeds?

heleng27

noh wrote: »

It does not matter whether or not any money has been received. The transfer of the shares is a disposal for CGT purposes.
http://www.hmrc.gov.uk/cgt/shares/basics.htm#7

Thanks for this, so could well look like the money has to be paid.

Does anyone know what affect this could have on benefits. Even though no money is involved would DWP look at it as if I earned this money. I'm worried this is benefit fraud

noh

pjclar02 wrote: »

Yes - but if the consideration is "nil" which is what the OP is suggesting has been received - then it is unlikely that any capital gains tax will be payable.

In what circumstance are you thinking the OP would have a CGT liability of £1,700 when she has not received any sales proceeds?

Read the link I have given in my post above.

"When you give away shares you usually work out your gain or loss as if you've sold the shares at market value. The market value is the price you would expect to receive if you sold them on the open market. This also applies if you sell them for less than their full value."