Can I give shares in my company to my children?

Yes, but there are several potential tax implications and therefore any transfers should be carefully planned.

Children under the age of 18 can technically be made shareholders in your limited company but due to the parent settlement provisions it is unlikely to be beneficial to do so for tax planning purposes. This is because the provisions require that any dividends over £100 per year received on the shares by a minor will be taxable in the hands of parents, rather than the child. 

For children over 18, the parental settlement provisions do not apply and therefore any income received will be taxable in the hands of the individual holding the shares (i.e. your child) 

Any shares transferred to your children are classed as a disposal for Capital Gains Tax purposes. Disposals will need to be calculated at deemed market value. This means that capital gains tax could arise on the transfer, even if the shares are gifted for free. Reliefs and allowances are however potentially available to mitigate any capital gains tax due. 

If the shares carry a value over the annual gifting exemption (£3,000 for 19/20) and are gifted to your children, the transfer will be considered a Potentially Exempt Transfer for Inheritance Tax Purposes. This means that if you pass away within 7 years from the date of the gift, your estate may have to pay inheritance tax on the transfer. Reliefs and allowances are however available to reduce the potential exposure to inheritance tax. 

Stamp Duty is also usually due at 0.5% on any consideration paid for shares but gifted shares with no consideration are normally exempt from Stamp Duty.

Including your children as shareholders in your company can facilitate effective long-term tax planning. If you would like to explore this area further, please let us know and we’d be more than happy to help.