Sale of US shares/options

badbob66

Hi, I am totally confused about the UK tax rules applying to sale of shares/options purchased/received via my employer. Please can anyone help? I an UK resident & working for UK company with a US parent.

Sale of shares:

I assume that where I purchased shares from my employer (albeit in US parent) at a discount at end of 6 month period, the discount (eg 10%) is taxed as income via PAYE.

If I purchase shares @ $10 & then sell (later on) @ $15, I assume $5 gain is subject to UK capital gains tax (subject to annual UK exemption threshold)?

Sale of options:

I assume that where I receive share options (eg to purchase @ $10), when I exercise those options to buy @ $10 & then immediately sell @ $15, I don't know whether $10 is treated as income & taxed per PAYE with $5 gain subject to CGT or whether $5 gain is treated as income & subject to PAYE & therefore the gain does not fall under CGT/count towards annual CGT threshold.

My employer currently withholds 50% of gain which is why I assume the gain only is taxed as income?

Sale of restricted stock options:

If an option vests @ $10 & I subsequently sell @ $15, I don't know whether $10 award is treated as income & therefore gain of $5 is subject to CGT or whether $15 is treated as income or subject to CGT?

thanks
Bob

Dead_keen

badbob66 wrote: »

Hi, I am totally confused about the UK tax rules applying to sale of shares/options purchased/received via my employer. Please can anyone help? I an UK resident & working for UK company with a US parent.

Sale of shares:

I assume that where I purchased shares from my employer (albeit in US parent) at a discount at end of 6 month period, the discount (eg 10%) is taxed as income via PAYE.

If I purchase shares @ $10 & then sell (later on) @ $15, I assume $5 gain is subject to UK capital gains tax (subject to annual UK exemption threshold)?

No, you get relief for CGT purposes for the discount taxed at grant. So, if you paid $10 when they were worth $11 then $1 would be subject to PAYE/NIC. When you later sell them for $15, the capital gain would be $4.

But it gets more complicated if:

- you have other shares in the company (you have to do "pool" the shares, effectively giving them a weight-average cost)

- you buy other shares in the company on the same day or the next thirty days (you match your sale with this purchase)

badbob66 wrote: »

Sale of options:

I assume that where I receive share options (eg to purchase @ $10), when I exercise those options to buy @ $10 & then immediately sell @ $15, I don't know whether $10 is treated as income & taxed per PAYE with $5 gain subject to CGT or whether $5 gain is treated as income & subject to PAYE & therefore the gain does not fall under CGT/count towards annual CGT threshold.

My employer currently withholds 50% of gain which is why I assume the gain only is taxed as income?

When you exercise your options, you pay $10. If you sell on the same day as you exercise, the $5 profit is subject to PAYE/NIC. There would be no capital gain.

A capital gain (or loss) could arise if you delay selling. In that case, your base cost for CGT would be $15 (but you still have to think about the pooling and matching rules).

It might be worthwhile asking your employer to set up an approved sub-plan so that the whole gain is subject to CGT and not income tax

badbob66 wrote: »

Sale of restricted stock options:

If an option vests @ $10 & I subsequently sell @ $15, I don't know whether $10 award is treated as income & therefore gain of $5 is subject to CGT or whether $15 is treated as income or subject to CGT?

thanks
Bob

Not entirely clear what you mean by vest at $10. If you have restricted stock units and the beneficial interest in the shares is transferred to you when they are worth $10 then you would pay PAYE/NIC on the $10. If you then sell at $15 the $5 gain is normally subject to CGT. Again, you have to thinking about the pooling and matching rules.

If you are actually exercising an option to acquire restricted stock (i.e. shares that are subject to restrictions after you buy them) then some of that $5 gain may be subject to PAYE/NIC. The rules here though are quite complicated.

badbob66

Thanks DK!

I plan to exercise/sell options on same day - so it makes sense that my employer withholds 50% of my gain to settle UK PAYE obligations (with any tax credit returned at end of the tax year). I wanted to make sure this gain should not also be considered for CGT! Bob

Cook_County

badbob66 wrote: »

Thanks DK!

I plan to exercise/sell options on same day - so it makes sense that my employer withholds 50% of my gain to settle UK PAYE obligations (with any tax credit returned at end of the tax year). I wanted to make sure this gain should not also be considered for CGT! Bob

If you do an excersale there is normally a small capital gains loss equal to the transaction costs - so yes you fill in the capital gains pages but owe zero CGT.