Employer share scheme that gives instant profits

Milky_Mocha

Hello I'm hoping someone has experienced this and can help me.

My husband explained to me that his employers who have very recently had an IPO have offered employees the opportunity to purchase shares at a third of its current cost, thereby creating an instant profit as he can re-sell at the current value.

My problem is we are in debt and are currently trying hard to clear this. We have no spare funds and he is suggesting we take out yet another loan in order to purchase these shares. His argument is that since we can make a great profit through this the loan can actually be paid off within two months leaving us with spare cash to pay off most of our other debts. The amount he wants to purchase is £10,000 to £15,000 worth of shares.

Now the way I see it, if it sounds too good to be true, it usually is. He is adamant that as this is not speculation but a win-win situation there is no problem and no risk.

I've set up a spreadsheet of our debts with a realistic forecast of when it will all be paid off. Looks like early to mid-2006.

Has anyone been given such an offer from his/her employers? Is it too good to be true? i cannot bear to think of losing as then that would bring our debts close to thirty grand.

Any comments/help would be appreciated.

cloud_dog

Milky I'm not a corporate expert but I would expect that any scheme that eployers offer employee will be subject to tax implications.

My company provide the 'new' style Save As You Earn scheme (about 3 years old now - Gordon Brown introduced it) whereby you are allowed to use some of your earnings to buy shares in your own company each month. The benefit to you (or your husband) is that the investment amount (lets say £100 pm) is deducted from his salary *before* tax is calculated. The effect of this will be to reduce your tax bill by £25 pm (for a lower tax payer) and £40 pm for a higher rate tax payer - in essense you are buying the shares at a 25% or 40% reduction to the prevaling market price.

The downside of this scheme (if your husbands is this scheme) is that if you sell your holdings before 5 years you will have to pay income tax on the sale. This applies to every month's purchase. So after 5 years you could sell your first months purchase but would have to wait another 5 years before seleling your most recent purchase.

This is all assuming your husbands scheme is this one.

btw its been a while since I checked the lower tax rate so the 25 may be inaccurate.

cloud_dog