Saving tax on foreign shares

aerobaticant

My previous employer is a wholly owned subsidiary of a Canadian company. When my employer was acquired by the Canadian company we were all given the option to buy shares in the company. I exercised this option when I left and now own shares in the Canadian company listed on the Toronto Stock Exchange (TSX). The shares are held in a trading account by a Canadian broker.

From what I have been able to ascertain, if these were shares in a British company which I work(ed) for then if I sell the shares I will be liable to pay income tax (40%) on the difference between the value of the shares when I exercised my option and the price I had to pay.

As these are Canadian shares, will I still be liable to pay this tax?

What would be the best, legal way of selling the shares, transferring the funds back to the UK and avoiding as much tax as possible?

Any ideas?

cash99

Generally for options in foreign companies, unless an approved UK option scheme was put into place, the gain on acquistion of shares under an option is taxable as income. In these circumstances it is the employers responsibility to deduct PAYE. Under self assessment you would have to declare the gain on acquistion of the shares as income, and any further gain on sale of the shares as a capital gain.

If you can provide more details about the terms of the option agreement, and whether or not it was covered by a UK tax approved scheme, I can provide a fuller answer.

Cook_County

The profit on exercise is subject to UK income tax and NIC (unless an approved plan).

If you sell the stock then the capital gain is then the difference between the strike price plus commissions less the sale price.

Unless you are a non-UK domiciliary leaving the money offshore saves no tax.

aerobaticant

Thanks for the replies.

The scheme is not a UK tax approved scheme. On the date I exercised my options I was no longer an employee of the company; the scheme gave me 30 days from my last day of employment in which to exercise my option. This I did by sending a letter and an international banker's draft to the parent company in Canada.

The shares are in the parent company, not the company who employed me. I don't know if that makes a difference - probably not.

As yet I have received no monies myself since I have not sold any shares. If anything I am out-of-pocket since I had to pay the exercise price to obtain the shares.

cash99

aerobaticant wrote:

The shares are in the parent company, not the company who employed me. I don't know if that makes a difference - probably not.

No it does not. The only relevant fact is whether or not you recieved the options by reason of your employment, which clearly you did.

aerobaticant wrote:

As yet I have received no monies myself since I have not sold any shares. If anything I am out-of-pocket since I had to pay the exercise price to obtain the shares.

Unfortunaterly is does not matter. Income tax is due when you exercise the option and acquire the shares. This should have been collected by your employer, regardless of whether or not you were still employed. I'm assuming that you did buy the shares at a discount from the market price.

Capital gains tax may also be due when you sell the shares.