Stock option - cashless sale

seh567

Hi, I am a standard rate uk tax payer, I am currently retired and pay tax on a small pension. Before I retired I was working for a US company and in 1999 was awarded some unqualified free stock options which have to be exercised before the middle of December. I exercised them today via a cashless sales which means they were exercised and sold at the same time, the gain to me was $914 dollars but upon viewing the brokers statement it would appear they have deducted 48% GBR tax. Upon speaking to them they say they have a treaty with the UK to deduct this tax at source which they will forward at some point to the UK tax office. I effectively filled in a treaty form W-8BEN allowing them to do this when I opened a brokerage account although on this form there was not an option to enter my National insurance number so where will this tax be assigned in the UK tax system? It would appear that I had no option but to fill in this form otherwise I would have been unable to exercise. Can anyone advise if this amount of tax is applicable and if not how do I go about claiming it back as I do not fill in an annual tax assessment. Thanks

seh567

Could someone give me some advice please

SeniorSam

seh567 wrote: »

Could someone give me some advice please

Try a quick call to the tax office on 0845 302 0900. They are very helpful and should be able to give you the information you need.

Sam

seh567

This number is for inheritance & probate tax so they won't be able to answer my question, but thanks anyway. I've tried to talk to my local office but all the technical advisers are busy, not having any luck with information so far!

Pumpkinface_2

Unfortunately this can be quite a complex area (as I know from personal experience), it is possibly one of those cases where professional help is required,

seh567

Hi all. Have received some more information which I would like to share incase someone else has a similar problem. Have spoke to the US broker again. It would appear that the withholding of taxes is stipulated by the company in this case HPQ. They in turn send the withheld tax (48.6%) to the uk payroll who deducts the UK NI & tax via PAYE and if a refund for the balance is due it is paid to the employee via their wages. In my case because I am retired and not on the payroll my refund will be sent direct to my bank account. Given that I am a standard tax payer (20%) and I no longer pay NI I am expecting a refund of approximately 28%. I guess it is done this way is to stop any avoidance of tax, I just wish it had been explained to me before I got a nasty shock.

I would just like to say it is extremely difficult to get an answer from UK tax office. I have spoken to my local tax office who where unable to help but agreed to put me through to a technical advisor, alas on 3 occassions they have not been available. They did request a call back for me but haven't received a response in 2 days.

Lyndsay101

There is an income tax charge on the difference between the market value today and the price you paid for the shares. The Company have an obligation to deduct basic rate tax as you are no longer an employee.

Employer's NIC may also be chargeable at 12.8%. Its common in these arrangements for the Company to pass the NIC liability onto you by making you sign an election or an agreement to settle tax on their behalf.

Assuming you left employment before receiving an age exemption certificate from HMRC for NIC then your ex-employer has probably also deducted NIC at 11% (above the minimum payment threshold).

48% seems far too much though.. were there any other charges you know of?

For further help, the Employees Share and Securities Unit at HMRC are reasonably ok (first link on google search). In my experience a call, followed by a letter to them and to the National Insurance Cotnributions office is likely to get you some of your money back, although tax at basic rate and employers NIC - 32.8% - are likely to have been chargeable anyway.

Lyndsay101

oops looks like you have you're answer now! i posted at the same time