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Share cap value - Sole trade incorporation

  • 12-03-2017 6:38pm
    #1
    Heisenburg81
    Closed Accounts Posts: 322 ✭✭


    If you avail of S 600 relief and defer CGT on incorporation, say for example the value of assets transferring is net €200,000 and full consideration in the form of shares.
    If the company issues 100 shares the value per share is €2,000 for CGT cost purposes - This doesn't dictate the nominal value of the shares issued on the balance sheet ie could the company still issue the 100 shares @ €1 nominal value and the €2,000 is just the market value for the shareholders?
    On incorporation all assets would be journalled in at TWDV and market value with the corresponding credit to the directors account?


Comments

  • #2
    Lockedout2
    Registered Users, Registered Users 2 Posts: 402 ✭✭Lockedout2


    If you Cr directors current account then S600 does not apply.

    Transferring equipment usually does not give rise to a CGT liability.


  • #3
    Heisenburg81
    Closed Accounts Posts: 322 ✭✭Heisenburg81


    Yes, no CGT on equipment - due to being transferred at TWDV.
    What is the credit entry then?
    Shares still at nominal value - say €100 so where does the remaining credit get posted - Share Premium?


  • #4
    Lockedout2
    Registered Users, Registered Users 2 Posts: 402 ✭✭Lockedout2


    Ya


  • #5
    dogsears
    Registered Users, Registered Users 2 Posts: 535 ✭✭✭dogsears


    If you don't have to worry about CGT as above, why not issue €100 worth of shares, transfer the equipment for cash consideration at market value but leave the consideration outstanding as a Directors loan - much easier to get the money out after than if issuing shares at a premium.


  • #6
    Heisenburg81
    Closed Accounts Posts: 322 ✭✭Heisenburg81


    dogsears wrote: »
    If you don't have to worry about CGT as above, why not issue €100 worth of shares, transfer the equipment for cash consideration at market value but leave the consideration outstanding as a Directors loan - much easier to get the money out after than if issuing shares at a premium.

    Because any consideration other than shares dilutes the s 600 relief and gains on goodwill for example would suffer CGT immediately on gain * cash consideration / total consideration. With new 10% CGT rate for qualifying assets you may want to crystalise gains.


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  • #7
    Heisenburg81
    Closed Accounts Posts: 322 ✭✭Heisenburg81


    Lockedout2 wrote: »
    Ya

    Can the premium then be used as a part financer of a share buy back down the line as part of an eventual fund extraction strategy?


  • #8
    dogsears
    Registered Users, Registered Users 2 Posts: 535 ✭✭✭dogsears


    Heisenburg81 wrote: »
    Because any consideration other than shares dilutes the s 600 relief and gains on goodwill for example would suffer CGT immediately on gain * cash consideration / total consideration. With new 10% CGT rate for qualifying assets you may want to crystalise gains.

    Sorry, I thought the scenario was that the assets were equipment with no CGT arising. To be honest I have only seen s600 used in practice very, very rarely.


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