We previously wrote about how to buy shares in a company and this week we’re looking at transferring shares. Shares might be transferred for a number of reasons and the practice is very common. Reasons can include:
- Tax efficiency – to an ISA, pension or spouse
- Agreed transfer between business partners
- Transferring shares to children
- Death of an existing shareholder
- As part of a change in company structure
- To free up cash
The first step to transferring shares is the completion of a stock transfer form, which the seller (transferor) will need to fill out and sign. If the shares have not yet been paid for in full, the buyer (transferee) will need to sign the form accepting the liability for the unpaid shares. All details must be included e.g. details of the seller and buyer, details of the shares, any consideration.
If Stamp Duty is due (check our previous blog to find out more) then the stock transfer form must be sent to HMRC along with payment and the address of where the form should be returned to, within 30 days of the date of the transfer. Failure to pay within this time frame could incur a penalty and interest.
Remember to make sure all details are correct. The three main reasons why HMRC rejects stock transfer applications are:
- the stock transfer form is not dated
- the SD is not rounded up to the nearest £5 on each document
- the consideration value is not shown on the form – remember that if shares are given as consideration you’ll need to give the value of the shares
If no Stamp Duty is due, then one of the two certificates on the back of the form must be completed (which one depends on the facts). The form can be sent directly to the company where the board can decide to approve the transfer and update their statutory records and issue new share certificates.
Companies House can be made aware of the transferred shares when the company’s annual return is due.