Shares Transfer

Daffodil3003

I am the sole director (100% shares) of a limited company and am looking to transfer 80% of my shares to my retired parent. My mortgage application (single applicant) is based on my salary only. 

I have been paid 50k for the last year so have 12 months of payslips already.

Lastly, if I wanted to buy shares back in 3-5 years - would this be an option?

Thank you

ACG

Its not legal. Its mortgage fraud. 

Daffodil3003

Thank you for your reply ACG - I am confused as from what I had read I gathered that one could do this and become an employee if share ownership is 20-25% or less? Do you mean buying the shares back in 2-3 years wouldn't be possible or transferring shares to a parent so one becomes an employee?
Thank you for your advice. 
It is probably best I speak to a tax adviser and mortgage company. I do have almost 2 years of trading, so can apply with salary, dividends and company accounts.

kingstreet

Lenders watch for this type of manipulation. It's easy to see on Companies House when a Confirmation Statement With Updates is added. Chances are the lender will see through your cunning plan and either decline the application; or request accounts and/or HMRC documentation.

Daffodil3003

Thank you kingstreet -so best option it seems is keep how things currently are with myself as a director with 100% share ownership, and apply for a mortgage with 2 years of accounts and payslips.

ACG

Daffodil3003 said:

Thank you for your reply ACG - I am confused as from what I had read I gathered that one could do this and become an employee if share ownership is 20-25% or less? Do you mean buying the shares back in 2-3 years wouldn't be possible or transferring shares to a parent so one becomes an employee?
Thank you for your advice. 
It is probably best I speak to a tax adviser and mortgage company. I do have almost 2 years of trading, so can apply with salary, dividends and company accounts.

You can do it, legally and morally there is no issue it happens all the time. The problem is that you are altering your circumstances in order to obtain a mortgage. Its the bit in bold that makes it fraud. 

But even if you decide you want to do this permanently for the long term, thats fine. But lenders will be cautious of this because people do it for the reasons you mention. 

Have you spoken to a broker? 1 years accounts using your income (either PAYE solely or PAYE and dividends) should be fine, providing the business has not made a loss. 

Daffodil3003

Thank you ACG - this is very helpful. I haven’t spoken to a broker yet, but yes company has made profit over the (almost) two years its been trading and I am paid 50k a year salary (for the last 12 months), I have a 10% deposit, and credit rating is between very good and excellent. So hopefully this will be enough to get a mortgage! 

amnblog

If you are taking your salary and the business is still profitable, you have no problem anyway.

Even if your genuinely presented as an employee of a business majority owned by family, the Lender will still want to see the business figures.

Daffodil3003

Thank you amnblog for your reply - most appreciated.

I have given a mortgage broker the business financial figures and have been approved for a MIP which is great news. 

ACG

Daffodil3003 said:

Thank you amnblog for your reply - most appreciated.

I have given a mortgage broker the business financial figures and have been approved for a MIP which is great news. 

Its always worth checking in with a broker. No need to mess about swapping shares and opening yourself up to tax complications or other potential issues and you still get what your after. Fingers crossed! 

Daffodil3003

Thank you ACG