Gordon Barlow

Here below is an email just received from a BE member. I'm posting it here in case his question and my (unsatisfactory) answer are of interest to other readers. There is nothing peculiarly Caymanian about the problem, by thye way.

Mr. Barlow, I am very sorry to bother you with this but as a UK citizen, long-time Cayman resident, and with a background in the financial sector I'm hoping you can point me in the right direction. So you know, I found your blog through your signature on the British Expats forum. I would have direct messaged you from there but I don't have the required minimum number of posts.
Here's my fix: I sometimes do small consulting projects from home. Rather than not get paid at all by a recent client with financial difficulties, I took payment in shares. The company is listed on LSE-AIM. I now have in hand a stock certificate for this company. Since I don't regularly deal in stocks, I don't have a brokerage account. Is there a discount firm you can recommend I call? All I want to do is deposit the certificate, sell the shares, then transfer the funds to my account. I have inquired at my bank but after their fees for selling, foreign exchange, and more, there won't be much left. I am a UK citizen and Cayman resident. I am most grateful for any advice.
Kind regards, XXXXX

XX, I don't know what to tell you. For one thing, I don't know what a "discount firm" is, in this context. Google tells me that AIM stands for "Alternative Investment Market", which I'm guessing would be for companies whose shares are few and closely held. You really have no option but to open a brokerage account or a bank account (in England) and instruct them to sell the shares. There won't be any exchange-loss, if you billed your client in pounds. How much are we talking about? If you're worried that the selling-fees are high, presumably the market-value of the shares is pretty low. If it's all too much of a bother, you might just have to write your time off. Sorry to be the bearer of bad tidings!

Pistolpete2

Would not the best thing be to do another barter. This time with somebody - a friend - who is mostly in the UK and has connections there and can easily convert the funds into sterling which they need. They could even wait until the funds are net credited to that friend's account before working out what the barter amount would be, net of hassle cost.

Has the certificate been endorsed?

TBuckely

Gordon Barlow - Thank you for posting this here. Discount firms is a reference to the online brokerage firms where trades can be made for a low fee. For example, with the US based firm of eTrade, stock trades can be made for around US$10. To open an account as a non-US resident; however, requires the filing of a form with the US IRS. I don't like the idea of having a filing requirement with a foreign taxing authority. There has to be a discount online brokerage option for CI residents that is not US based and doesn't require an enormous opening deposit amount. AIM is a market for small, start-up companies and is regulated by LSE. AIM company shares are freely traded. Would using a broker in England subject the earnings to income tax there? Finally, I'm not going to miss a meal if I have to write this off, but its enough that I would prefer not to do so.

Pistolpete2 - Your suggestion is a thought but that approach would almost certainly result in me having to also cover the associated tax, which I'm trying to avoid. With regard to endorsement I have not done anything with the certificate but my name is printed on it.

TA for your thoughts.

Pistolpete2

Thinking out loud here because this is a tax issue which one is reluctant to advise on, particularly on BE.

Surely the tax issue arises in Cayman because that is where you did the work - so there isn't one. The shares are consideration and there is no taxable gain or income tax issue in the UK. Isn't that always the subtlety of doing professional work in 'havens' such as Cayman and Bermuda.

If you were resident in the UK for tax purposes then paying the funds into your account there would be a remittance to the UK which could affect your tax position but the use of a broker there seems neither here nor there to a third party as there is no gain / income in the equation - it's a swap for cash you are getting in Cayman.

I'm assuming the cost of brokerage services at your bank in Cayman that was prohibitive was with Butterfield or the like.

Gordon Barlow

I don't know of any discount online-broker based in Cayman, I'm afraid. As for using an English broker: that's a question you might want to post on one of the UK threads here. My guess would be that as long as you're not resident in UK for tax purposes, you wouldn't be liable for tax on the proceeds of any sale of shares through a UK broker. But that's just a guess.