Buying Discounted Employer Stock as a Short Term Investment

Jersy

Hi

I have been working for my employer for nearly 6 years, andthere is a stock purchase option which I have not used before now, however Ihave had an interesting conversation with someone over the weekend which has methinking!

Deductions are made from your salary from either of theannual starting points, January or July, and at the end of the following sixmonth period stock is purchased at 85% of the market value (30/June and31/December accordingly).

One of the benefits is tax relief, so on my calculations(tax at 20%) this would provide 38% investment if sold on the same day as theshares are issues (obviously assuming no change in the share value between timethat shares are received and sold). And also the FX rate (USD to GBP) should not change significantly duringthis period. There is not period where the shares have to be held before theyare sold on.

Less the transactional charge of selling the shares AND alsoassuming that the shares can be bought in a S&S ISA and therefore taxfree....

Using £100 per month as an illustration, over a 6 monthperiod, this would be £600 for my salary, but gaining £828 (less transactionalfee) back by selling the shares immediately.

Am I being over hopeful with this?



I am trying to reduce the levels of tax which I am paying(legally). To date I have increased my pension contributions.


Thanks

Jersy

latecomer

No idea on the general tax implications but you cant lose with this and you wont get a guaranteed 15% return on your money anywhere else. Put in the maximum allowed and sell immediately to get the guaranteed return.

Jersy

latecomer wrote: »

No idea on the general tax implications but you cant lose with this and you wont get a guaranteed 15% return on your money anywhere else. Put in the maximum allowed and sell immediately to get the guaranteed return.

Excellent - that is what I thought, but with tax benefits it could be even better!

gadgetmind

What is the scheme actually called? There is a lot of different legislation regards tax breaks and you need to be clear up front how the gain is treated.