Share Options/CGT

mikec31_2

Hi,
Last July, I excercised 10,000 share options at 100p each in the FTSE company which I work for. It is an approved CSOP scheme and I'd had the options since March 2003. The shares are now trading at 600p. I do expect to stay with the company for the forseeable future (2 years +). Can someone clarify for me if these are classified as ' business assets ' or ' non-business assets ' for taper relief, as the timing and CGT implications of selling the shares appear to be quite different dependent on how they are classed?
Thanks in advance for any guidance.

Chrismaths

They are business assets for as long as you work for the company. If you stop working for the company, it gets complicated, but essentially they are part classed as business assets. So if you work for the company for 2 years, then leave and sell them after 2 further years, they are half business and half non.

Business taper means after 1 year it's tapered to 50% then 25% after 2 years. The options don't count - it's from when you exercised them. So July 2008 they will be fully tapered.

So if they are still 600p in Jul 2008 and you sell, realising a profit of 500p per share = £50,000, then you will have a tapered gain of £12,500. You'll have an exemption of around £9k, so you might want to sell it in two parts, one then and one in the following tax year.

mikec31_2

Thanks Chrismaths, that's very useful to know. One further question: if I leave after 2 years, would I be better off selling the shares while I am still employed by the company and they are still business assets (because taper relief on non-business assets is nowhere near as attractive)??

Chrismaths

Yes and no. Like I say, if you leave having held the assets for 2 years, (so they are fully tapered), then hold them for 1 year, then 2/3 of the gain is business, 1/3 not. So it depends on how the shares behave afterwards!

But yes, you are likely to be better off in tax terms (not necessarily overall) if you sell them when you leave, or soon after.