A company, not its shareholders, owns its own underlying assets so a gift of shares is not a gift of those. This is reinforced indirectly by the specific excluded property rules in Sch A1.
But a gift of the shares themselves can be a GROB if the benefit related to them (at the time or later-acquired) arises not by contract but “otherwise” or by “associated operations”. They are not a gift of land or an interest in it nor of chattels so para 6 Sch 20 is no direct help (e.g. full consideration) save that 6(2) applies to confirm the property to which a benefit must relate.
However the word “benefit”, where not specifically defined, is an ordinary English word. This is so throughout other fiscal legislation and involves negation of a benefit by full consideration. See employment income benefits (“making good”), participators in a close company, capital “payment” from non-resident trust, non-transferor transfer of assets abroad rules. A judge might hold (and HMRC might anticipate or even admit it) that consistency should prevail unless context demands otherwise.
HMRC accept that on the gift of a part holding of shares retention of others is not in itself a benefit (IHTM 14314). But it will be a question of fact whether or not the benefit attaches to all shares or only to those given away. If the benefit attaches only to those retained or to both it is hard to see a problem or a need to employ full consideration, which may produce unwanted taxable income without corresponding deduction.
If the shares do not confer a subsisting right this may be done by “shearing” or “carve out”. Case law forces HMRC to recognise the principle. IHTM is a bit coy about a gift of shares but is are forced to acknowledge it in relation to other assets and once in 14334:
"Example 3
Aarif makes a gift of shares to Basheera, it being part of the package that Basheera would appoint Aarif to the Board of Directors, a salaried position entitling him to a company car and other fringe benefits.This would be regarded as the reservation of a benefit to the donor “by contract or otherwise”.
Conventional wisdom is that where a gift is planned the donor should ensure maximisation of all required future possible benefits (remuneration, pensions) and entrenched class rights, including any intrinsic mechanism for uprating either, so that the advantages of this kind (arguably) are attached or “referable” (IHTM 14333) to the shares retained, as opposed to those given away, and do not later have to be newly introduced or enhanced in a way that affects those gifted shares. A bona fide pay rise might not do that by analogy with the partnership cases (A-G v Boden case and IHTM 14315) but whether consideration was “full” could be subjective and even entail admissible and disclosable evidence that it was not.
Deliberately enveloping a property with a view to such an operation might fall foul of the current risk of “judicial denial of reality” as being a gift of the land; if so it must surely then be treated as if it were such in all respects including ss102B and para 6 Sch 20.
Jack Harper