Tax on Share Schemes (post redundancy)

happywarmgun

I have recently taken redundancy. I was a senior manager in a FTSE100 company so the payment was very decent and used the whole 30k tax free allowance.

I am setting up my own business (developing software). Given that the development will take about 6 months I anticipate no revenue and therefore no personal income until well into next tax year. I've filled in my P50 and will be getting back anything over-paid.

The thing that I'm not clear on is how my two share-schemes should be treated for Tax purposes.

The first scheme was one of those where you pay 150 quid a month into a pot for 3 years, and at the end of the term you can use the whole 9 grand pot to buy your companies shares at a fixed price. By an accident of timing my redundancy has co-incided with the end of the term - so I have the full amount. The fixed price is currently about 80% less than the share-price so it seems a no brainer to buy and sell. However, I'm not clear of any tax implications on the profit made on this? Can anyone help?

The second share scheme is one of those where you pay 115 a month from your wages which buy shares at market value in your company and add them to a pot. For every five shares you buy the company give you one free. I've done this for seven years and built up a pretty decent pot given the share price has more than doubled over that time. When I was made redundant the company said it 'paid tax and NI on all matching shares'. Not quite sure what this means. Anyway, given the shareprice is at an all time high it does seem sensible to turn both schemes to cash - but is there a CGT implication? Should I stagger it an shift some next tax year? Like I say, I will have no other income for a long time so need to be careful not to cut my throat here.

If anyone has dealt with this themselves or is a tax whizz I'd be very grateful for any advice...

fred_karno

Try link below to direct.gov site.
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/WorkingAndPayingTax/DG_10022224
it explains things and has a link itself to
http://www.hmrc.gov.uk/shareschemes/sip-info-employees.rtf#d This gives share incentive plans info.
In brief, it seems to me : -
The share save scheme (SAYE) means if your shares were valued at £2.00 and you were able to save for 3000 shares = £6,000 and the value is now £4.00 = £12,000, you potentially pay CGT on £6,000. If you keep the shares for a period, then you use the final sales value (which could go either up or down from £4.00) to calculate your gain. There is no income tax to pay.
The second scheme- the link to the HMRC site suggests that as long as the shares come out of the plan due to redundancy, there is no tax to pay at all - otherwise if you voluntarily leave a company in under the plan time, you would pay tax. Only if you hold them and they go up in value between now and when you sell, will there be CGT to pay on this difference.
Thing to remember is that you have £10,000 CGT exemption each year. If you are married, you can transfer some shares to your wife and she also has the same exemption. Alternatively if your gain is big enough, keep some until 6th April and sell and you have another £10k of exemption.
If I were you, I would list down the figures and go to see the tax office. They will not give advice, but if you ask a specific question which covers how much you got the shares for and how much they are currently worth and what kind of scheme it is, they will normally explain to you the tax legislation and what is payable - or at least what you have ot put in your tax return etc.
Good luck.

beaker141

The company paid tax and ni for you ! - perhaps they like trying to make out they have done you a favour!

I had the same scheme as your 2nd one, the only reason I joined was because I knew redundany was coming and I would be able to keep the tax and ni benefits of the scheme at redundancy.

happywarmgun

I'd forgotten about the CGT allowance. Thanks for reminding me... am probably just about good for not having a liability.

Great.

Ta...