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Gifts of Shares - Fraudulent Shares
Due to the attractive tax reliefs available to individuals who donate shares to charities, there are unfortunately some individuals and organisations who will try to use this to their advantage. This page will try to raise some of the pertinent issues around share scams and potentially highlight ways to help identify if a scheme is not legitimate and signpost places you can go for further information.
It is worth mentioning that some shares have conditions attached and may still be legitimate gifts that can benefit charities and allow tax relief to the donors. This page is merely trying to raise awareness to the issue of fraudulent transactions.
Are there any government measures against this?
The Government introduced the Finance Bill 2010 in an attempt to end exploitation of the relief available for donations of listed shares and other investments. The legislation will lower the tax relief on certain arrangements that are set up to benefit an individual or company, rather than a charity.
More information, including the legislation and explanatory notes can be found on HMRC’s website.
What signs may indicate that gifts of shares are not legitimate?
There is no one type of share or one way to transfer shares, as there can be many aspects at play. However, there are some characteristics that should set alarm bells ringing before you accept the shares. These include:
- “Lock ins” – if a company donates shares with a condition that they cannot be sold for a specific period of time
- “Buy back” – if a company donates shares with a condition that they have the option to buy them back a year later
- “Deposit” – if a company asks for a deposit that will be returned when you get the shares. As a rule, if it sounds too good to be true, then it normally is! If there are any conditions to the gift, or if there is anything that does not seem legitimate, then speak to a financial advisor.
How can we verify that a company/firm is legitimate?
If a company approaches you with an offer and you are unsure about their credentials, then it is always best to seek professional advice. There are also some other avenues that you can try yourselves:
Step 1 – Check with Companies House
- Check the company is registered at Companies House
- If the company is registered, check the registered number and address corresponds with the information they have provided you with.
- If the company is not registered, then contact a financial advisor, and maybe trading standards for further advice.
Step 2 – Check where the shares are listed
- If the company offers you shares, check that they are actually on a recognized stock exchange. HMRC have a detailed list of approved stock exchanges, which is available to the public and can be found on their website. If the shares are not listed on the stock exchange, it does not automatically mean that they are not legitimate, but it will prevent the individual donating them from receiving any tax relief.
- If the shares are not listed on an HMRC approved exchange, speak with a financial advisor or HMRC for further advice.
Step 3 – Charity Commission and getting references
- If the company claims to have worked with other charities and made them money, see if the charity is registered with the Charity Commission. If so, contact the charity and ask for verification of the company’s claim.
- If the charities are not listed on the Charity Commission website, then speak with a financial advisor and contact the Charity Commission for further advice.
Step 4 – The Financial Services Authority (FSA)
- If the organisation claims to be a firm qualified to carry out financial transactions, check the FSA register to see if they are registered.
- If an organisation is not registered, it does not mean that you cannot use them, but if there are any problems, your avenues of complaint and compensation are limited.
- The FSA have a list of firms that are known to act in an unauthorized manner and this can be found here.
- If the organisation isn’t listed, then speak with a financial advisor or the FSA for further advice.
Step 5 – Contact the Company
Even if the company is registered, there may still be a possibility that the people who contacted you are fraudsters and not actually from that organisation. Take the name and telephone number of the person who contacted you and get in touch with the firm to verify if they are actually a part of that firm.
Where can we find further information?
Further information and contacts for this subject can be found in the following sources:
