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Rakhi Vasavada
Rakhi Vasavada, Financial Advisor
Category: Finance
Satisfied Customers: 4546
Experience:  Attorney and Financial Expert. Have specialization in Financial Laws.Practice experience of over 13 years
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I understand that when you form a new company and allocate

Resolved Question:

I understand that when you form a new company and allocate its shares, those shares don't cause any tax implication for the recipient(s), ie they have no implied value. Myself and some collaborators are doing that, except it's working out a little different,
time-wise: the person with the money has formed the company first, a couple of months ago, and he is now trying to re-allocate some of his shares to the other people working with him. We don't have a product yet and we're not selling anything or bringing in
money, but it occurs to me that in the couple of months it has been trading the firm has paid some people/companies for services, and has acquired some designs and some working software. And the company has also been talking to potential customers of our planned
first product. So, obvious question: if he does now reallocate shares to the rest of us (at no cost to us, by the way), would HMRC possibly think that these shares have some value - eg that the firm is trading in some way, or has some assets, say?
Submitted: 2 years ago.
Category: Finance
Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend, Hello and welcome. Thank you for providing an opportunity to assist you. From what I understand from your situation, you are correct to say that when the firm is trading something it might have acquired "nominal" book value of its shares. If this is not the case and if the company is just paying others for the services it took, it might be operating with net losses and the shares having NO value / book value. In any case, when the Shares are allocated to you, it will have its notional value. Shares are allocated only against two things. Either it is allocated against consideration of Cash OR they are allocated against consideration OTHER THAN CASH, which appears to be your case. In this case, even if you DO NOT PAY anything and just receive the share, the company will show some 'book value' of shares in its books. That book value will form the BASIS for you (Cost) when you sell those shares in future. I am sure this would help. I wish you good luck. You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question. Warm Regards
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