Question: Is there any problem with a director of a AIM company, who owns 8% of the company, making an in specie contribution of his shares to a SIPP? His unrelated co directors own the majority of the equity in the business.
Ian Westwater, James Hay: "In the situation described, an in-specie contribution involving the shares in the AIM company would be possible. The value of the shares would be applied as a net contribution that would be grossed up for basic rate tax relief. Remember, for the contribution to be fully tax relievable the gross contribution must not exceed 100% of earnings. Not all SIPP providers allow in-specie contributions."
Andy Leggett, Suffolk Life: "Suffolk Life does not accept in specie contributions. However, we can achieve the same result via a connected party transaction and I answer on that basis. (If you would like more information on the onerous conditions applied to in specie contributions, the potential liabilities your client could be exposed to and how a connected party transaction works as an alternative, please click here.)
"The restriction does not apply specifically to AIM-listed shares but relates to the taxable property rules (click for HMRC's taxable property guidance - see 17.4.3). We would only accept these shares as a connected party transaction if the client confirms that they, together with their connected parties (as defined in S.993 Income Tax Act 2007), do not hold a total of 20% or more of the shares in the company. So this hinges on whether the other directors, described as 'unrelated', would be classed as 'connected' or not."
Mary Stewart, Hornbuckle Mitchell: "Placing AIM-listed shares into a SIPP is perfectly acceptable as they are listed shares and we would allow these to be made as an in specie contribution. There are no issues around member connection as the shares are listed, so the company will be subject to the rules governing the stock exchange."
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