Gifting shares to a family member
Discussion
Hello,
We’re thinking about gifting a nephew some shares in my company, it’s a listed company and the shares would be bought on the public market.
What’s the easiest way to do this for a child? I would be nice to be able to do this as a surprise (e.g. not request the parents to have to do anything), however, I’m assuming this wouldn’t be possible due to AML etc?
We’re hoping that in a few years time it could help towards a house.
Any help gratefully received.
Thanks
We’re thinking about gifting a nephew some shares in my company, it’s a listed company and the shares would be bought on the public market.
What’s the easiest way to do this for a child? I would be nice to be able to do this as a surprise (e.g. not request the parents to have to do anything), however, I’m assuming this wouldn’t be possible due to AML etc?
We’re hoping that in a few years time it could help towards a house.
Any help gratefully received.
Thanks
Smirnoffmark said:
Hello,
We’re thinking about gifting a nephew some shares in my company, it’s a listed company and the shares would be bought on the public market.
What’s the easiest way to do this for a child? I would be nice to be able to do this as a surprise (e.g. not request the parents to have to do anything), however, I’m assuming this wouldn’t be possible due to AML etc?
We’re thinking about gifting a nephew some shares in my company, it’s a listed company and the shares would be bought on the public market.
What’s the easiest way to do this for a child? I would be nice to be able to do this as a surprise (e.g. not request the parents to have to do anything), however, I’m assuming this wouldn’t be possible due to AML etc?
You say child, so therefore assume under 18 years of age.
Purchase the shares in certificated form in your own name first.
Jarvis, Tunbridge Wells, have reasonable charges for certificate purchases.
After you have received the certificate, do a transfer (forms on internet, send to the registrar).
Transfer into the child's parent name followed by 'A/c XXX'. (XXX being the initials of the child) as a nil cost gift.
That is called a designated account.
As the gift is not from a parent, the asset will become that of the child and therefore income tax personal allowance and CGT allowance will be available. Little need for an ISA therefore, unless you intend to be extremely generous.
My suggestion is whatever you do don't get bogged down in certificated shares. Absolute nightmare.
Get the little dear(s) sorted out with an ISA or, better still, a SIPP. Or do both 50/50. Yes, they will get income tax relief on a SIPP investment!
For example, if you pay £80 to the SIPP provider the amount of cash actually invested is £100 because the SIPP provider reclaims £20 from the government. (Maximum on this is £2,880 p.a. per child which means actual investment value £3,600.)
Get the little dear(s) sorted out with an ISA or, better still, a SIPP. Or do both 50/50. Yes, they will get income tax relief on a SIPP investment!
For example, if you pay £80 to the SIPP provider the amount of cash actually invested is £100 because the SIPP provider reclaims £20 from the government. (Maximum on this is £2,880 p.a. per child which means actual investment value £3,600.)
rockin said:
My suggestion is whatever you do don't get bogged down in certificated shares. Absolute nightmare.
Opinions differ on that point. I agree that it would be completely wrong if you are a short-term trader, but not if you are a long-term investor.
Presumably as the OP was referring to listed shares in his own business, it would probably be a long-term strategy. Hope that single holding will later be joined by others though.
Everyone in financial services employment hates certificates, because you cannot earn regular fees from those shareholders.
OP referred to hopes for a future house deposit. The strategy which I outlined was used for my own children during a 35 year investment period. There was no CGT to pay (annual allowance available) and in the early years (before Mr Brown), tax on dividends could be reclaimed because children are usually non-tax payers. The majority of the fund was eventually used recently, towards a deposit on a first home (detached in leafy Surrey), so rather than being an 'absolute nightmare', it worked out far better than anticipated.
Each to their own. Many of us choose different strategies, but for me, the Warren Buffett philosophy works well.
Not sure about your advice for a child having a SIPP (pension). How can that help buy a home when you are age 20 or 30? I know little about pensions except that the rules have changed in recent years, but can you withdraw the whole of a pension fund at age 25 years for a house deposit? Need to think ahead in case the money is stuck and cannot be withdrawn, when a government decides to change their rules.
Edited by Jon39 on Saturday 14th September 14:18
rockin said:
My suggestion is don't get bogged down in certificated shares.
Very briefly,
- There's been a recent thread on here where someone was trying to sell a "share certificate" worth about £100 and found no-one would touch the trade without a minimum charge of around £50. Ouch.
- If you lose a share certificate charges will be even higher, with registrars requiring you to buy a bank indemnity at significant additional cost before accepting any dealing at all.
- Certificates are old-fashioned. The world has moved on.
- Unless someone is going to monitor progress of the company whose shares you've bought it may be better to buy a "fund" - perhaps a low cost index fund.
- A 50/50 split between ISA and SIPP can deliver a flexible combination of long term and short term planning while pocketing a bit of tax relief ("free money"). One potential advantage of the SIPP is that junior can't spend it on coke and hookers at age 18....
rockin,
Not of much help to OP.
You have given a politicians answer to my question about SIPPs, so we still don't know.
It is your second time of suggesting that the OP's child (the idea being to save for house deposit) should have a SIPP.
We still do not know at what age a SIPP fund can be withdrawn in full.
Of course, first time home buyers obviously need their deposit at a reasonably young age.
Not very good financial sense, to buy a first home when about to retire.
rockin said:
Very briefly,
... and in as little as five years the system will be dematerialised as certificates are abolished. - There's been a recent thread on here where someone was trying to sell a "share certificate" worth about £100 and found no-one would touch the trade without a minimum charge of around £50. Ouch.
- If you lose a share certificate charges will be even higher, with registrars requiring you to buy a bank indemnity at significant additional cost before accepting any dealing at all.
- Certificates are old-fashioned. The world has moved on.
The OP's topic is about how to gift shares to a child. Of course under 18s cannot be shareholders, but they can still be the beneficial owners of shares.
There does now seem to be a reluctance by stockbroking 'platforms' to provide share purchases in designated accounts, which is what is needed for gifts to children.
Try telling HMRC that a shareholding in your name and with dividends being sent to you, is not really yours at all, but an asset owned by a child.
This is a problem which at present can be resolved with certificates. Buy in your name (because brokers won't do designations), then transfer into a designated account title.
I thought certificates would be discontinued years ago, but for some reason, they still continue to be used.
Edited by Jon39 on Sunday 22 September 16:35
Jon39 said:
Try telling HMRC that a shareholding in your name and with dividends being sent to you, is not really yours at all, but an asset owned by a child.
Now, I'm not the sharpest tool in the shed, but what would attract HMRC's attention? Tuck the little dears into an ISA and/or SIPP (£23,600 p.a.) and it's not obvious to me why any sort of tax intervention would be involved at all.On the other hand, chuck £1,000,000 at the kids and I imagine Mr HMRC might be awake and paying attention....
rockin said:
Jon39 said:
Try telling HMRC that a shareholding in your name and with dividends being sent to you, is not really yours at all, but an asset owned by a child.
Now, I'm not the sharpest tool in the shed, but what would attract HMRC's attention? Tuck the little dears into an ISA and/or SIPP (£23,600 p.a.) and it's not obvious to me why any sort of tax intervention would be involved at all.On the other hand, chuck £1,000,000 at the kids and I imagine Mr HMRC might be awake and paying attention....
It may not be a complete answer to what the OP was looking for, but the point Steve is making is correct.
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