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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5147
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Can an individual be allocated shares in a company, without

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Can an individual be allocated shares in a company, without incurring a personal tax liability, for his development of a website prior to its incorporation and following incorporation, but prior to trading. And also for providing the company with thousands of precedent legal documents, that would cost the company many tens of thousands of pounds if they were to have purchased the same?

Hello and welcome to the site. Thank you for your question.

Based on scenario presented , the short answer is no...

If the allocation of shares are in lieu of fee that would be otherwise payable for work done prior to incorporation and also once incorporated. then the value of shares would be the deemed income that would be chargeable to income tax I'm afraid.

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Customer: replied 3 years ago.

Thought that was the case - could I then get the company to credit my directors loan account for a sum equal to the value of the assets provided and not draw that money from the company, as it would be unable to pay it in the short term. then allocate the shares unpaid - with the intention of using the directors loan account to pay the shares at a later date, thereby deferring the personal tax liability?

Robert, thank you for your reply.

As far as payment for assets provided is concerned, credit to directors loan account due to financial constraints would be an acceptable and allowable option.

In due course converting loan into equity would be feasible.

I am not sure how these movements would have an impact on personal tax liability because paying you for assets provided would not be treated as income unless these assets were used by you in business in the first place.

I hope this is helpful and answers your question. and other Tax Specialists are ready to help you

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