Transferring shares to your wife (or civil partner)? With the introduction of the new dividend tax rules it has sharpened the focus on trying to extract money out of the family company in a tax efficient manner

The possibility of the husband and wife both utilising the £5,000 dividend allowance does appear to be very attractive!

So, if the wife does not own any shares in the company can a portion be transferred across from the husband to her?

Will there be any capital gains tax to pay?

The shares can be gifted by the husband to his wife and there should not be any capital gains as they are deemed to be transferred over at “no gain, no loss” basis in accordance with TCGA 1992 s 58(1)

However if the wife is an officer or employee of the company care needs to be taken when considering whether the value of the shares could constitute employment income

What about Entrepreneurs’ relief (ER)?

If both spouses wish to claim Entrepreneurs’ relief (ER) when the shares are eventually disposed then certain conditions need to be met for at least one year before the disposal. Generally this would include the following: is this the individual’s personal company i.e. do they own at least 5% of the ordinary capital and voting rights, is it a trading company and are they an officer or employee of the company.

So it is important to review ER conditions before you dispose of your shares to ensure you qualify for the very favourable 10% tax rate

If you have any questions regarding the above then please do not hesitate to contact me by sending an email to kevin@kwaccounting.com