Can I transfer shares to my children? - YouTube

Hi there Nicholas Campion here with another instalment in the 1st Formations

video blog series today we're looking at

company shares and whether you can transfer them to your children

and to do this we'll go through reasons why shares are transferred to children

how the actual transfer takes place and a brief look

at the potential tax implications of those transfers themselves

transferring your shares to your children who need to be

minors under the age of 18 is a great way to get them interested

in the world of investment and to teach them about financial markets

but there are a number of important points that you need to consider

before making the decision to give them shares including tax implications

and any company restrictions that might be in place

a lot of public limited companies flat out forbid child shareholders

and private companies too will often include a provision in the articles of

association that prevent shares from being held by a

person under the age of 18. now the reason that

some uk companies have concerns about children being shareholders is because

in england and wales and northern ireland

they are deemed not to have legal capacity to enter into a contract

as a result this could relinquish any shareholder

obligations they might have for example paying unpaid shares

that can make it tricky for the company to attract investment

later down the line scotland has slightly different rules

in that the legal capacity to end to a contract

starts at the age of 16. anyone considering transferring shares to their

children should first check if there are any

rules about minimum age requirements for shareholdings contained

not just in the articles of association of the company

but the shareholders agreement now there are a number of reasons why

you might transfer your shares to your children and the first of which

is in the case of an estate individuals with significant

share portfolios may prefer to resolve questions about

inheritance by essentially distributing their estate to their children and their

loved ones whilst they're still alive next there is

tax efficiency now for smaller investors getting some

of their shares to their children may help relieve the tax burden although

this is usually minimal there may also be a desire for keeping

things within the family if shares are held in a family company

gradually transferring these shares over to their children can be a way of

ensuring that the business remains family run for the foreseeable

future and finally there are the financial lessons that can be gained

parents who like their children to take an active interest

in finance and investment may be able to pique their interest

by giving them some shares of their own so whatever the reason

for transferring the shares to your children it's important to understand

the issues and restrictions that could arise

from such actions and it may actually be beneficial to

seek the advice of an accountant or a solicitor so that's why you might

transfer your shares to your children now let's talk actually how we go about

undertaking it now it looks um here the procedure to be

a long convoluted one but actually transferring

your shares to your children is just like transferring shares to anybody else

which in itself is usually rather simple the first step of transferring shares is

to complete a stock transfer form also known as either a j10 or a j30

the information this form will need includes information about the company's

name the amount of consideration to be paid

which will often be nil or zero a description of the security which

is usually the share class which is

often ordinary shares simply ordinary shares

you also need to provide the number of shares that are being

transferred across the name address of the current shareholder that's the

parent together with their signature and the

name and address of the person receiving the shares which in this case

would be the child finally if the transfer is not subject

to any stamp duty then the stock transfer form will also need to

be certified as being exempt by signing one of the certificates on

the reverse now at this point the stock transfer

form would normally be sent off to hmrc for stamping uh in cases where the

consideration value is greater than one thousand pounds

and as well as process the actual payment but in the case of

a parent gifting the shares to their children

this step isn't actually required as there'll be no stamp duty

to pay the form should form should then be checked by the company

and in the absence of any provision in the articles of association

restricting transfers to minors the share transfer would normally be

accepted approval of share transfers ordinarily

is a straightforward process necessitating only a board resolution or

set of board minutes a new share certificate would be

issued to the the child in question uh and this should be done within two

months of the transfer being accepted by the

company now the company itself should then

retain the form and as well as a copy of the original

share certificate they produced the restaurant members should then be

updated to reflect that the transfer has taken place

now you're not actually required to inform companies house immediately of

share transfers or new shareholders coming on board

and you can wait till the next one is due although you can file an early

confirmation statement if you so wish now first summations

offers the complete share transfer service which includes

all of the aforementioned documentation including stock transfer

form board resolution and share certificate

finally let's just take a look at the potential

tax implications of transferring shares to children the

first one we need to cover is capital gains tax shares transferred

to children will be classified as a disposal for the

purposes of capital gains tax unlike if you were to transfer them to a

spouse to work out the level of tax payable

the difference must be calculated between the value of the shares when

they were initially purchased and the value upon their transfer

to the children if this figure exceeds the annual capital gains tax allowance

either on its own or in the combination of

with other capital gains tax matters then the tax rates of either 10

or 20 will need to be paid depending on the level of income

when transferring a large number of shares it may be worth considering

spreading this over several years in order to take advantage of the

multiple capital gains tax allowances this can significantly reduce your tax

bill next there is inheritance tax when you transfer shares to your

children it's generally considered as a gift

for the purposes of inheritance tax if the transfer or dies

which in this case is the parent within seven years of making a transfer

the transferee which is the child will be liable to pay inheritance tax

the level of tax that needs to be paid will depend on the number of years that

have elapsed since the gift was made and the death

and the actual amount you pay is based on a sliding scale

known as taper relief you should note that up to 3

000 pounds worth of gifts can be made each year without being subject to

inheritance tax and this is known as the annual exemption

so one way to transfer your shares to your children whilst minimizing your tax

burden is to do yearly batches of three

thousand pounds it is possible to carry any unused

portion of the annual exemption forward one year although you can only do this

for one year you also need to remember that if you

transfer shares to your children for less than the market rate

the portion between the sale price and the market value

will generally be considered as a gift but

by hmrc this sort of gift is known as the potentially exempt transfer

and will be subject to the normal rules of inheritance tax

last but not least our dividends now dividends

are normally paid to shareholders out of the profits of the company

children under the age of 18 are entitled to receive the first 100 pounds

of income from savings or shares tax-free but

anything over this amount will be added to the

income of their parents and attributed to them for the purposes

of income tax as such any tax efficiencies in respect

of share dividends are generally negligible here but the

stocks and shares junior individual savings account

allows children to hold up to 9 000 pounds that's the 20 20 21 limit

tax-free children can take advantage of the junior individual savings account

from the age of 16 but they cannot withdraw money until

they are 18. a more complex alternative to

such an account is for the parents to create a trust

the shares can be invested in the trust by the settlor law which in this case is

the parent who will then specify the beneficiaries

which are the children a trustee then needs to be appointed to

manage the trust and there are many types of trusts out

there but the most common one that's used for managing assets for the

benefit of children is known as a bare trust once the

beneficiaries reach the age of 18 or 16 in the case

of scotland they will be able to access the shares

held in them and sell them on if they wish and that's

it so today we've looked at why parents

transfer shares to their children how they can do it and the tax

implications that they need to be aware of when they undertake it

if you have any questions please leave a comment and don't forget to like this

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more videos just like this we'll see you next time cheerio