Tax on shares

sabelu

Hi I have been allocated shares by my company that I am now able to sell I will pay tax in the US as they are an American company will I then have to pay uk tax too as income

pchelpman

The answer depends on a number of factors including where you are resident for tax purposes, in which country you file your Tax Returns, how large the Capital Gain is and the UK/USA double tax treaty.

In simple terms, if you are a typical UK resident and domiciled person then you would normally be expected to make a declaration of this gain to the UK HMRC.

If your total worldwide capital gains in the same year as this share total less than the "annual exemption" then you shouldn't have any UK Capital Gains Tax to pay here.

If there is UK CGT due then, normally, that bill will be reduced by the amount of the USA tax paid on that gain.

Note that the USA tax on the gain can only be used to reduce the UK CGT bill to zero.

In other words, if the US CGT bill is larger than the UK CGT bill two things will happen.

1. You won't have any UK CGT to pay but...

2. HMRC won't give you a "refund" of the excess USA tax paid (HMRC won't repay another country's tax)


Hope that helps.

jimmo

pchelpman wrote: »

The answer depends on a number of factors including where you are resident for tax purposes, in which country you file your Tax Returns, how large the Capital Gain is and the UK/USA double tax treaty.

In simple terms, if you are a typical UK resident and domiciled person then you would normally be expected to make a declaration of this gain to the UK HMRC.

If your total worldwide capital gains in the same year as this share total less than the "annual exemption" then you shouldn't have any UK Capital Gains Tax to pay here.

If there is UK CGT due then, normally, that bill will be reduced by the amount of the USA tax paid on that gain.

Note that the USA tax on the gain can only be used to reduce the UK CGT bill to zero.

In other words, if the US CGT bill is larger than the UK CGT bill two things will happen.

12. You won't have any UK CGT to pay but...

2. HMRC won't give you a "refund" of the excess USA tax paid (HMRC won't repay another country's tax)


Hope that helps.

Sorry, but that is a prime example of the proverb "A little knowledge is a dangerous thing."
Assuming that you are resident in the UK the first principle is that if your employer gives you anything then there is Income Tax (and National Insurance) liability on the value of the gift.
http://www.hmrc.gov.uk/manuals/eimanual/EIM01450.htm
There are all sorts of exemptions and relief potentially available but nobody can tell if any of them are available in this case without a lot more detail.
sabelu,
As things stand I would guess that, rather than having been given shares by your employer you have been granted share options.
If so, you may find this thread interesting.
https://forums.moneysavingexpert.com/discussion/3204466

pchelpman

I understand what you are saying, jimmo, but I didn't go so deep.

Undoubtedly you are right and sabelu has been granted some form of share scheme/option or rights of some sort but that wasn't the question.

You say you "guess that, rather than having been given shares by your employer you have been granted share options."

You may be right but I simply focused on what was asked.

Had I been sabelu's tax advisor, yes, I would have asked many more questions.

However, this being the forum it is, I chose to start from the OP's statements....

sabelu wrote: »

Hi I have been allocated shares by my company that I am now able to sell I will pay tax in the US as they are an American company will I then have to pay uk tax too as income

All historic. Although the word "allocated" is used other remarks indicate that sabelu is the owner of the shares in question. It appears the deed has been done.

1. sabelu HAS already been given the shares

2. he/she says he/she is able to sell them therefore the shares are in HIS/HER name

3. sabelu says US tax will be paid on the sale.


Given all that, I addressed the single question as to whether he/she will then go on to pay UK CGT.


(Just to put the record straight I don't have a "little" knowledge. I am a fully qualified tax advisor who has made quite a decent living from the subject running my own firm. We have several UK and overseas clients with with interests in various employer share schemes of major international investment banks and other financial institutions. We are fully familiar with the rules regarding domicile and residence for UK tax purposes including the new approach set out in HMRC6 and related case law. We are also familiar with the rules & regulations of various major share schemes).

kadelskav

Thank you for sharing. good work.