Tax Query on Selling Shares from Sharesave Scheme

hobbesandco · 2 March 2005 at 9:03PM

I'm hoping I can get a response to this. My partner bought shares in the company we work for via a Sharesave scheme. The scheme was for 3 years and was meant to mature at the end of this year. We got taken over just recently and took up the company's offer to sell the shares at the offer price which is substantially higher than the price my partner originally paid for the shares.

I spoke to my boss who said because the shares were bought out at the higher offer price and because technically they haven't 'matured' that any gains made from the sale is subject to income tax rather than capital gains tax. Can anyone confirm this? And if so at what rate (my partner is a higher rate tax-payer)?

My partner also bought the company's shares directly NOT via the Sharesave scheme. Is the profit subject to capital gains tax?

Thanks in advance.

WHA · 2 March 2005 at 9:34PM

The profit will be subject to either capital gains tax or income tax. But, it is too complicated to generalise. I would get some professional advice from an expert.

Paul_Varjak · 2 March 2005 at 10:05PM

I would suggest contacting the company whose share you bought. They are best placed to say what applies in this case, especially as some shares were bought by your partner, outside of the sharesave acheme.

myhandle · 10 March 2005 at 2:30PM

This happened to me a few years ago, participating in a sharesave scheme, then TUPEd into another company, so had to leave the scheme, but could make a further 6 months of contributions.

After the 6 months I exercised the option to by the shares, shares were then worth more than the option price so I was liable for income tax on the difference between their value on the day of exercising and the price paid (seems like a capital gain to me, nevertheless income tax was due).

Several of my colleagues, me included, were sent tax returns for the first time that year, looks like the IR were informed of what was going on, those among us who ahem neglected to mention were sent polite letters and had to cough up in the end.

I would guess that any shares bought/sold outside of a sharesave scheme would be subject to the normal capital gains allowances/dividend tax regime.

cash99 · 10 March 2005 at 3:47PM

The early termination of the share save scheme has voided all the tax benefits ( gain taxed as a capital gain not income) consequently the gain on the shares will be taxed as income, and as you other half already pays higher rate tax it will be 40%.

In these circumstances I am surprised that you employer is not collecting the tax from you. Generally with any unapproved share options or any unapproved share aquistion schemes the employer is required to collect the tax.

WIth regard to the other shares your husband bought, if these were at a discount to market value then the difference between the price paid and the market value is also taxable as income. Again if this is a company scheme the company is responsible for collecting the tax.

If the shares were purchased in a general public offer then there should be no tax to pay, but this can get complicated if he got a priority application as an employee. The basic rule is anything obtained by "reason of employment" is taxed as income, unless there is a special scheme or dispensation in place to cover it. e.g the share save scheme

Your HR department should be able to tell you the exact position, failing that speak to a tax accountant.

Tax Query on Selling Shares from Sharesave Scheme

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