Who Holds the Shares?

‘Setting up a company’ is believed to be an easy thing to do – and with everything being readily available online these days, buying an off-the-shelf company feels as if it should be a bit like, well, falling off a log.

However, as one gentleman found to his cost when he went through a court case against HMRC, you can actually end up with a boat-load of expense from trying to do things the easy way, or from taking poor advice. Which is why, here at Jones Harris, we are always here to discuss the best options for your own personal circumstances.

A Mr Terence Raine discovered all this to his own cost, when he was given a £41,450 tax and penalty bill because the company which formed and managed the annual accounts for his limited company had made a mistake, shown in the case Terence Raine v HMRC TC05201.

A recruitment consultant had initially advised that Mr Raine should open a limited company in order to gain work. Giant Accounting Ltd then offered an off-the-shelf company to Mr Raine and his business partner Ms Hamilton, where they would hold one share each as Company Director and Company Secretary. Giant Accounting were to deal with all accounting, payroll and company secretarial requirements. So far so good.

However, Giant never actually completed paperwork which would have given Mr Raine and Ms Hamilton that important one share each, and company returns were submitted in Mr Raines name only for a period of 10 years.

Meanwhile, Giant prepared dividend vouchers with equal amounts of dividend payable to Raine and Hamilton, which was declared on their respective tax returns.

Eventually HMRC caught up with the mismatch.

Put yourself in Mr Raine’s shoes. Would you have spotted that the shares were in your name only when you signed the company accounts? Would you have realised that dividends can only be paid to shareholders? Or would you have just signed the paperwork off with a cursory glance?

The First-tier Tribunal decided that Raine must have realised the error and he is now liable for tax due and penalties.

Good advice

Jones Harris has been in business for over 40 years and in that time we have advised more people and set up more businesses than we care to remember.

We are more than happy to guide you through the best options for how your new business should be owned, who the officers should be, how you should be paid and what you can legitimately claim through your company. That way you can rest easily in the knowledge that you have received and understood the best advice from the outset, and haven’t got any expensive surprises waiting for you down the line.

Why don’t you get in touch for a no-obligation chat?

Get the latest updates

Make sure that you’re following our website and sign up for the Jones Harris enewsletter here

Don’t forget we’re also on Twitter @JHAccountants and you can follow our LinkedIn business page, Jones Harris Accountants

There are
good reasons
why we’re
Lancashire’s

No. 1

The Jones Harris Difference
  • A personal, dedicated contact
  • Free strategic advice on growth and profitability
  • Free, unlimited telephone / email support
  • Proactive tax advice and analysis
  • Profitability checks via competitor benchmarking
  • A steady flow of good money-saving ideas
  • Active business network introductions
  • Secure client web-space for document sharing
  • No need to email important/sensitive data
Contact us