Tax on selling shares from 'share save scheme'

savingbucks

Need an advice. When my old company was bought out by another company I had to sell the shares I acquired through the company share save scheme.

I made a small profit. I am not sure how much and what kind of tax to pay on this.
- Do I have to combine this income from profit with my salary and pay income tax for this combined income?
- Or I have to treat this profit separately and check whether the profit falls under the annual CGT exempt?

xylophone

http://ld.practicallaw.com/9-107-4444#a528886
"The effect of corporate transactions

Dealing with the effect of a corporate transaction on the holders of option and awards under employee share plans can be complex and time consuming, particularly if there are a large number of employees involved.
The company will need to identify how the proposed transaction affects employees participating in different share plans, communicate with the employees about the proposals, follow the employees' instructions in relation to the transaction and withhold and account for any tax and NICs due on the transaction under PAYE.
Thorough due diligence is essential, to understand exactly who is affected by the transaction, and the tax and other consequences that may arise. The exact issues, process and tax liabilities will depend on the type of transaction and the type of scheme involved. For more information on specific types of transactions, see the following Practice notes:
The effect of a private company sale on existing employee shares and options.

Share incentives in quoted company takeovers made by way of an offer.

Share incentives in quoted company takeovers by schemes of arrangement.

Demergers and employee share schemes: an overview."

http://www.hmrc.gov.uk/working/bens-shares-tips/shareschemes.htm
might throw some light?

savingbucks

Xylophone - Thanks for your response.
I have looked up the HMRC site, it is not very clear to me hence I thought of querying on this forum.

John_Pierpoint

The tax treatment treatment of your share save scheme depends on its approval by HMRC.

If you already have the shares it is most likely you will be facing CGT - a sympathetic take-over usually results in your shares becoming some sort of loan stock, so you can transfer some to your spouse/legal partner and sell in dribs and drabs, over more than one tax year, thus keep within the annual gains allowance of £10,600.

If you are still saving and are not able to exercise you option, then the rules may be different depending on the attitude of your company.

When B.Gas fell apart under the watchful eye of a pig called Cedric, the company undertook to indemnify employees for unexpected tax effects, the company I worked for did not do so in very similar circumstances.

If you don't still have or don't understand the details, of the share save deal you signed, speak to your company secretary, who should understand that you speak as a shareholder as well as an employee !!

savingbucks

JohnPierPoint - thanks for the advice.

If I keep it below the annual exempt (£10,600), does this mean I don't have to pay any CGT or income tax on this profit?

This was my understanding till HMRC fired a letter to me that I need to pay tax on this profit though the profit is far below the annual exempt. I am completely at a loss to understand this.

John_Pierpoint

Unfortunately it depends on the sort of share save scheme you have.
Like all good ideas - the tax man and the accountants thinking "tax avoidance", not reduce staff turnover and reward loyalty encourage interest and commitment, have tied the concept up in rules and regulations. Only you and /or the company secretary have access to the rules of your particular scheme.

Is this your situation:

http://www.thisismoney.co.uk/money/experts/article-1676000/Sharesave-tax-bill-has-come-as-a-shock.html

Lots more information if you put hmrc sharesave schemes into Google

savingbucks

Thanks once again.

Ridiculous situation :-(