One for the tax experts

[Hooshabak]

I have some management share options that are exerciseable in a week or so and don't want to pay the excruciatingly painful tax that will be coming my way, circa 42% im guessing.

So i wondered if i could buy the shares at the exercise cost which is £39k get the share certificate give half to my mrs then transfer into an stocks and shares isa with HL so 19K each, then sell the shares through the and be free from CGT and income tax?

Does that sound like a thing that could be done?

Cheers
Dave

[Halitosis]

I’m no expert but if taxes could be circumvented that easily the loophole would quickly be closed, so I suspect the answer to your question is no.
Presumably the tax liability arises the moment you first receive the shares, regardless of what you do thereafter


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[Kingstepper]

Are they exercisable before end tax year? If so, could you exercise half this year and half next year - might help?

[TKH]

I think you might be in the realms of ‘Bed and ISA’...

https://www.ii.co.uk/ii-accounts/isa/bed-isa

[Hooshabak]

Are they exercisable before end tax year? If so, could you exercise half this year and half next year - might help?

Unfortunately not, 12th April so just outside

[Hooshabak]

I’m no expert but if taxes could be circumvented that easily the loophole would quickly be closed, so I suspect the answer to your question is no.
Presumably the tax liability arises the moment you first receive the shares, regardless of what you do thereafter


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Tax only arises upon sale of shares and the gain, you can exercise and own the shares first

- - - Updated - - -

I think you might be in the realms of ‘Bed and ISA’...

https://www.ii.co.uk/ii-accounts/isa/bed-isa

Thanks, will have a look

[Seadweller75]

I have some management share options that are exerciseable in a week or so and don't want to pay the excruciatingly painful tax that will be coming my way, circa 42% im guessing.

So i wondered if i could buy the shares at the exercise cost which is £39k get the share certificate give half to my mrs then transfer into an stocks and shares isa with HL so 19K each, then sell the shares through the and be free from CGT and income tax?

Does that sound like a thing that could be done?

Cheers
Dave

I believe a tax event arises upon exercise of the option. I don’t believe there is a way around this unless the option was granted under an approved UK stock plan, which has certain tax exemptions. Worth finding out if this was an approved or unapproved plan.

[Kingstepper]

I believe a tax event arises upon exercise of the option. I don’t believe there is a way around this unless the option was granted under an approved UK stock plan, which has certain tax exemptions. Worth finding out if this was an approved or unapproved plan.

Yes, but tax should only be payable on difference between exercise price and actual stock price on that day so tax shouldn't be due on the whole 39K.

Unless OP got option at massive discount might not be too bad?

[wuyangkid]

I just exercised some options through my work last month. The cost was only 9k and I left just enough room in my ISA to accept them so that was fairly straightforward

I'm not a tax expert but I would assume that if you transfer to your wife, your wife's cost base would be the value transfered and that you would have to pay tax on the different between the option and and the new tax base at which your wife received the shares

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[Hooshabak]

Yes, but tax should only be payable on difference between exercise price and actual stock price on that day so tax shouldn't be due on the whole 39K.

Unless OP got option at massive discount might not be too bad?

Correct, tax is only due on the difference and at current price the gain is about 30k, so I’m about to have my legs completely chopped off lol

[gbn13]

The starting point is to find out from your employer the specific legislation under which the option(s) was granted.

Most employers will provide information about the options and the time of grant and also at the point when the options may be exercised.

The legislation can be complex, particularly when taking into account interaction with the history of other options exercised and shares of the same class already held. Mistakes can be expensive.

[deepreddave]

Correct, tax is only due on the difference and at current price the gain is about 30k, so I’m about to have my legs completely chopped off lol

No, you're about to receive a £30k bonus by virtue of your employment so I expect your employer will deduct shares to cover the tax/NIC due, on exercise, because it's essentially just pay. Congrats and enjoy it.
If you decide to keep the shares then you can pop them into an ISA to keep any future gains (or losses) outside the scope of capital gains tax, subject to the ISA limit.

[Suds]

Guess the company accountant (or Stanley Johnson) will know? Worse case scenario is that your glass will be 58% full?

[Seadweller75]

Yes, but tax should only be payable on difference between exercise price and actual stock price on that day so tax shouldn't be due on the whole 39K.

Unless OP got option at massive discount might not be too bad?

Yes, that’s correct. Any taxes due will be in the difference. It really is worth finding out the rules of the plan the option was granted. Good luck.


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[Bonny Marco]

Do you know what type of share option scheme has been set up for you? Sometime employers can set up tax efficient share option schemes, sometimes using Employee Benefit Trusts ("EBT"), which can shield employees from some of the tax. (Disclaimer - I'm not a tax expert, but in one of my former jobs they had a scheme.)

It might worth going back to the scheme administrators to find out more. They should be able to help.

A bit of web searching brought up this guide from Deloitte which describes a few potential scenarios for share options.

https://www2.deloitte.com/content/da...s-oct-2016.pdf