Pricing shares for tax purposes
Our expertise in share transactions
We have reviewed the value of shares in wide ranging circumstances and often set against an ongoing background of hostility. Often we have helped tax payers report and pay the correct amount of tax following a share transaction.
Gannons recently helped a Singaporean businessman price his shares for tax purposes.
We acted for a former chairman and shareholder of a Singaporean medical services provider company. The business had gifted our client redeemable preference shares which he retained upon his exit from the business.
Our client approached us when he no longer worked for the business. We valued his shares for the purposes of reporting the income tax liability on his tax return and to help make the payment of tax due before the deadline to avoid interest.
The company’s balance sheet had a large provision for internally generated goodwill which artificially inflated the value of the company. However, the company had a history of not paying dividends. Therefore, it was unlikely that our client would receive dividends in the foreseeable future. Despite rumours about an initial public offering, many shareholders were pulling out from the company and it was it was common knowledge that exit was unlikely.
Restrictions in the articles depleting the price of the shares
We successfully argued with HMRC that the restrictions in the Articles (shares could be redeemed at any time) and the remote possibility of exit mean that shares which can be redeemed at par value have little value for tax purposes. Our client submitted the values that we agreed on his tax return and now carries on investing in private companies across Asia.
How to approach pricing of shares in private companies is a strong specialist area for Gannons.