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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 10601
Experience:  FCCA FCMA CGMA ACIS
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We are a UK based tech startup. We are going into our first

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Hi there,
JA: Hi. How can I help?
Customer: We are a UK based tech startup. We are going into our first round of Seed investment next month. Currently we're doing our pre-funding admin work in which I am transferring shares to my co-founder. The share price is currently £0.000001 (as incorporated) and this is the price I will transfer my shares at to my co-founder. But, if by the end of next month we raise our first round of investment which ends up increasing our share price at the completion of funding, are me and my co-founder now liable for tax on the shares that I transfered to her?
JA: Have you talked to a tax professional about this?
Customer: not yet
JA: Is there anything else the Accountant should know before I connect you? Rest assured that they'll be able to help you.
Customer: no
Customer: replied 11 days ago.
Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call.
Customer: replied 11 days ago.
Let me know if you need more information, or send me the service offer(s) so we can proceed.

No, it is a gift of no value.

Sorry, I do not do telephone calls any more they are no longer cost effective.

Customer: replied 11 days ago.
ok no problem about the call.
Customer: replied 11 days ago.
my concern was that because the share transfer is close to the potential future funding raise (and thus increase in share price), it could mean that we may be liable on to pay tax on the shares at the new share price, even though the shares were originally transfered at £0.000001
Customer: replied 11 days ago.
but you are saying this would not be the case? and there wouldn't be tax implications?

No, because at this stage the shares merely being of nominal value no Potentially Exempt Transfer (PET) is created.

Customer: replied 11 days ago.
understood. that is good to know.
Customer: replied 11 days ago.
is that the same in the case if new shares were issues to someone at the £0.000001 share price - again same time period as described above - PRIOR to the future investment round?
Customer: replied 11 days ago.
there would be no tax as the shares are still of this nominal value?

Correct.

Customer: replied 11 days ago.
ok great. so finally to wrap it up and summarise...The fact that that a near future funding round - (in which the share price may increase from the original value of £0.000001 to another not yet defined price) - is soon after when the share transfer/issue was completed at £0.000001.... has not impact on tax implications for those shares transferred or issues because shares were transferred at nominal value.
Customer: replied 11 days ago.
sorry - just want to make sure im being thorough

What happens in the future is irrelevant, it is the situation now which matters.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 11 days ago.
understood - thanks for your help

Pleased to have been able to help.