In the scenario where two retiring directors (parents) receive termination payments of for example £6,500 each and then gift their shares to the remaining (son) shareholder, several legal and tax considerations arise. Here’s an overview of the key aspects to consider:
Company Law Considerations (Companies Act 2006)
a. Termination Payments to Directors
• Termination payments to directors are allowed but must comply with:
•
1. Director’s Service Agreement: Check whether the contracts entitle them to termination or ex-gratia payments.
2. Shareholder Approval: If the payment exceeds £50,000, shareholder approval is required. In example case, £6,500 each falls below this threshold, so no formal shareholder approval is necessary unless required by the company’s articles - but I owuld advocate this for transparency for all involved.
3. Fairness to the Company: Payments must be justifiable in terms of company benefit and avoid being considered disguised dividends or excessive remuneration.
b. Gifting of Shares
• Directors can gift shares to the remaining shareholder, but the following should be considered:
• Company Articles of Association and Shareholders’ Agreement: These may (usually) contain pre-emption rights or restrictions on share transfers.
• Stamp Duty: No stamp duty is payable on a gift of shares, as long as no consideration is given.
• Documentation: A stock transfer form must be completed, and the transfer recorded in the company’s register of members.
Tax Implications
a. For the Retiring Directors (Personal Tax)
• Termination Payments:
• The first £30,000 of a termination payment is tax-free if it qualifies under the statutory rules (e.g., for loss of office).
• If the payment is contractual or linked to employment, it will be subject to Income Tax and National Insurance as earnings.
• HMRC may scrutinise payments to ensure they are not disguised dividends or bonuses.
• Gifting Shares (Capital Gains Tax - CGT):
• Gifting shares to another shareholder can trigger a deemed disposal for CGT purposes, potentially leading to a tax liability on the giver.
• If the shares have increased in value since acquisition, the donor (retiring director) might face a capital gains tax liability. See next doc about this, usually P.E.T.s
• However, Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) could reduce CGT to 10% if qualifying conditions are met.
b. For the Remaining Shareholder (Personal Tax)
• Receiving gifted shares does not trigger immediate tax liability for the recipient.
• However, if the recipient later sells the shares, their base cost for CGT will be deemed to be the market value at the time of the gift.
c. For the Company (Corporation Tax)
• The company can deduct termination payments from taxable profits if they are made wholly and exclusively for the benefit of the trade.
• However, if HMRC deems them excessive or not commercially justified, they may be disallowed.
Alternatives to Consider
If the intention is to efficiently transfer ownership, consider:
• Buyback of Shares: A share buyback may be more straightforward from a tax perspective if done correctly, provided distributable reserves exist.
• Employee Ownership Trust (EOT): If the remaining shareholder is also an employee, an EOT structure might offer tax advantages.
• Deferred Consideration Arrangement: Rather than gifting, a gradual purchase via deferred consideration could offer flexibility.
Practical Steps to Take
Review Articles and Agreements: Ensure there are no restrictions on share transfers.
Assess potential CGT and income tax implications.
Draft a stock transfer form and board resolution to approve the transaction.
Update the register of members and PSC (Person with Significant Control) register if applicable.
Updated table with better-than-basic systems for POS and workshop management integrations, excluding any that require middleware like Zapier.
For the purposes of this table, we have more robust integrations with POS and workshop management systems that are known to integrate natively with the main accounting systems.
Integration Costs:
• POS System: Lightspeed or Square POS are integrated with systems like Sage, QuickBooks, and Xero.
• Lightspeed: Typically £69/month per user (Standard Plan).
• Square POS: Typically Free with transaction fees.
• Workshop Management Systems:
• Jobber: £29/month for the Core plan.
• ServiceM8: Starts at $29/month (approximately £23/month for the Starter Plan).
System
5 Users Cost (Monthly)
POS Cost (Monthly)
Workshop Management Integration Cost (Monthly)
Total Monthly Cost
Annual Cost
Xero
£50
£0
£23 (ServiceM8)
£73
£876
KashFlow
£41.65
£0
£29 (Jobber)
£70.65
£848
Zoho Books
£40
£19
£29 (Jobber)
£88
£1,056
FreshBooks
£62.50
£0
£29 (Jobber)
£91.50
£1,098
QuickBooks Online
£125
£0
£29 (Jobber)
£154
£1,848
Sage Business Cloud
£125
£69
£29 (Jobber)
£223
£2,676
Microsoft Dynamics 365
£600
£69
£29 (Jobber)
£698
£8,376
Explanation of Changes:
1. Sage Business Cloud: Integrated with Jobber for workshop management. The POS system (Lightspeed) costs £69 per month for 1 user.
2. QuickBooks Online: Integrated with Jobber for workshop management. The POS system is free for Square POS (with transaction fees), so no additional charge is added here.
3. Xero: Integrated with ServiceM8 for workshop management, which costs £23 per month for the starter plan.
4. Zoho Books: Integrated with Jobber for workshop management. The POS system (Zoho POS) costs £19 per month for 1 user.
5. FreshBooks: Integrated with Jobber for workshop management. The POS system is free for Square POS (with transaction fees).
6. KashFlow: Integrated with Jobber for workshop management. The POS system is free for Square POS (with transaction fees).
7. Microsoft Dynamics 365: Integrated with Jobber for workshop management. The POS system (Lightspeed) costs £69 per month for 1 user.
Notes:
• Jobber and ServiceM8 are used as the workshop management integrations.
• The POS costs are based on either Lightspeed or Square POS, which are integrated directly with these accounting systems. The cost for Square POS is free for basic use but will have transaction fees.
Total Monthly and Annual Costs:
• The total monthly cost includes the 5 users, 1 POS user, and workshop management integration for better systems (i.e., Jobber or ServiceM8).
• Annual cost is calculated by multiplying the total monthly cost by 12 months.
Description: SAP Business One is an enterprise-level resource planning (ERP) system, primarily used for managing inventory, operations, and finance in larger businesses.
- Odoo:
Pricing: Starts at €24/user/month for the basic plan (with additional modules costing extra).
Annual Cost: €1,250/year for 5 users (approx. £1,050 depending on exchange rates). Additional modules or features would increase the total.
Description: Odoo offers a flexible, modular ERP system with various business management tools, including inventory, sales, and supply chain management.
2. Payroll Software Integrations:
Gusto:
Pricing: Starts at $39/month + $6 per employee for the basic plan.
Annual Cost: $468/year for the base plan + $72/year per employee, totaling $708/year for 5 users.
Description: Gusto offers payroll, HR, and benefits management solutions, tailored for small to mid-sized businesses. It’s a user-friendly payroll system with integrated tools for compliance and tax filing.
Xero Payroll:
Pricing: £5/user/month (included with Xero subscription, or an additional £5 per employee per month for the payroll-only plan).
Annual Cost: £60/year per user for the basic plan, totaling £300/year for 5 users.
Description: Xero Payroll integrates with Xero to offer payroll processing, tax filing, and payslip generation. It’s ideal for small businesses already using Xero for accounting.
QuickBooks Payroll:
Pricing: Starts at $45/month for the basic plan + $4 per employee per month.
Annual Cost: $540/year for the base plan + $48/year per employee, totaling $720/year for 5 users.
Description: QuickBooks Payroll integrates seamlessly with QuickBooks Online and offers automatic payroll runs, tax filing, and benefits management.
3. Field Service Management:
Field Service Dynamics:
Pricing: Part of Microsoft Dynamics 365, pricing typically starts at £70/user/month for the basic version.
Annual Cost: £4,200/year for 5 users.
Description: Field Service Dynamics provides advanced tools for managing field workers, scheduling jobs, tracking service performance, and handling on-site inventory, ideal for service-heavy businesses like maintenance or repairs.
4. Advanced Reporting and Analytics:
Tableau:
Pricing: Starts at $70/user/month for the Creator plan.
Annual Cost: $840/year per user, totaling $4,200/year for 5 users.
Description: Tableau is a leading data visualisation tool that helps businesses analyse and present data through detailed visual reports and dashboards. It integrates with a wide range of data sources, including Xero, QuickBooks, and Google Analytics.
Power BI:
Pricing: Starts at $9.99/user/month for the Pro version.
Annual Cost: $119.88/year per user, totaling $599.40/year for 5 users.
Description: Power BI is a business analytics service from Microsoft that allows you to create interactive reports and dashboards from a variety of data sources. It’s cost-effective and integrates with many systems like Xero, QuickBooks, and Microsoft tools.
Summary of Annual Costs (for 5 Users):
System
Cost / User
Min Users
Annual Cost (5 Users)
SAP Business One
£600/user/year
1+
£3,000/year
Odoo
£250/user/year
1+
£1,250/year
Gusto (Payroll)
$141.60/user/year (~£120)
1+
$708/year (~£600)
Xero Payroll
£60/user/year
1+
£300/year
QuickBooks Payroll
$144/user/year (~£120)
1+
$720/year (~£600)
Field Service Dynamics
£840/user/year
1+
£4,200/year
Tableau
$840/user/year (~£700)
1+
$4,200/year (~£3,500)
Power BI
$119.88/user/year (~£100)
1+
$599.40/year (~£500)
These annual costs are estimated based on the google available standard pricing for 5 users. Costs WILL fluctuate based on additional modules or customisations. I doubt power Bi would be more than one user - think of it sort of like an Excel add-on.
The prices in US dollars for some systems (like Gusto, QuickBooks Payroll, Tableau, and Power BI) are due to the fact that these systems are typically priced in USD, especially when they are primarily targeted at US-based businesses or available internationally but priced in USD for global customers.
Here’s a breakdown:
• Gusto and QuickBooks Payroll are both popular in the United States, and their pricing is typically quoted in USD, even if you’re using them in the UK or another region.
• Tableau and Power BI are widely used globally, but their standard pricing tends to be in USD on many official websites.
For the sake of simplicity, I have provided the approximate conversion to GBP using exchange rates to give a rough idea of the costs.
Accounting and Bookkeeping:
• Sage Business Cloud
• QuickBooks
• Xero
• Integration with bank feeds and payroll software (e.g., Gusto, Xero Payroll, QuickBooks Payroll).
Supply Chain Management:
• SAP Business One
• Odoo
• TradeGecko (also listed under Inventory Management, but mentioned as a Supply Chain Management option too)
Cloud Storage and Document Management:
• Google Workspace
• Microsoft OneDrive
API Access for Custom Integrations:
• Ensure the system supports API for future integrations and customisations.
• TradeGecko appears in both Inventory Management and Supply Chain Management, which makes sense since it can integrate with both functions.
• Middleware solutions (like Zapier or Integromat) were mentioned for bridging systems that may not have direct integrations.
• Data flow considerations: It was noted to ensure seamless integration and minimise manual data entry, which would apply to all these systems.