CGT on Sharesaves...?

C_Mababejive

Could anyone summarise the rules on shares bought through official company sharesave schemes please?

My understanding is that once you actually get to the action date of turning your monthly savings into shares,you have a limited time in which to shelter them.

What about if you took up the options but still hold the shares purchased several years down line?

Ta

Perelandra

C_Mababejive wrote: »

Could anyone summarise the rules on shares bought through official company sharesave schemes please?

My understanding is that once you actually get to the action date of turning your monthly savings into shares,you have a limited time in which to shelter them.

What about if you took up the options but still hold the shares purchased several years down line?

Ta

Sharesave: Subject to capital gains tax on the difference between the option price and the sell price (payable in the year in which you sell the shares). Can be mitigated by splitting the sales over multiple tax years, gifting to spouse, or putting into a tax shelter. I believe that the time window is 90 days from exercising the option:

(for both documents, there's a link to an RTF file that contains more detail, although this looks a little old now).

Source: https://www.gov.uk/tax-employee-share-schemes/save-as-you-earn-saye


Share Incentive Plans: Subject to income tax and NI if the shares have not been held for 3 years (matching or dividend) or five year (partnership). Free from CGT as long as you keep them within the plan until you sell them.

Source: https://www.gov.uk/tax-employee-share-schemes/share-incentive-plans-sips

chris_m

I can only base this on my plans for my company schemes, so you'd need to check that it would also apply to yours.

We have 6 months (under our scheme rules) from the maturity date in which to exercise the option to take the shares. We also have 90 days after exercising the option in which we can transfer them to an ISA without a disposal, HMRC rules IIRC.
Therefore, with the (potentially very lucrative) scheme that I have maturing in August 2014 and assuming that all things remain equal (or better in the case of the share price) my plan is;

1) wait a little less than six months before exercising the option, around mid-Jan 2015. IIRC the option expires on Jan 31st.
2) As soon as I have access to the shares, instruct my own broker to transfer a year's ISA allowance-worth into my ISA. Once they are in there I will either sell or hold.
3) Instruct for the remainder, less an ISA's allowance, to be transferred to my nominee account. Sell a CGT allowance worth from the nominee account straightaway.
4) On April 6th 2015 (new tax year) and still within the 90 days from acquiring the shares, instruct the broker to transfer a further ISA's worth allowance into my ISA, then either hold or sell.
5) If that leaves any left over (if, maybe, the SP went up since Jan or there were still too many for step 5), have those transferred to the nominee account as well.
6) Sell up to a CGT allowance-worth from the nominee account.
7) Deal with any left over in the nominee account the following year, and (if very lucky) the year after that to keep gains below the CGT allowance for each tax year.

Summary, get up to £40K+ whilst paying the taxman nowt ;-)

One other handy thing is that transfers out of the Equiniti account into which the shares get put is that transfers out are free of admin fees for 90 days too, so I won't have to pay those either.

I've already tested the process with some free shares we were given some years ago on which any tax liability had expired. IIRC the shares were in my Equiniti account within 2 days of issuing the instruction, and in my broker's account within 7 days of issuing that instruction.

What about if you took up the options but still hold the shares purchased several years down line?

That comes under my point 7. Any gain is then based on the share price at the time one exercised the option and actually acquired the shares.

MoneySaverLog

Perelandra wrote: »

I believe that the time window is 90 days from exercising the option:

So in the first year, if over the life of the sharesave you pay in £15,000 are you allowed to sell £25,600 worth Given your CGT Allowance of £10,600. Then are you allowed to put in a further limit to the annual ISA allowance.

If the option date is 1st April, are you able to do two lots in a S&S ISA to shelter around another 20K or do you have to wait for the shares first to arrive given the close proximity to the tax year border?

Perelandra

MoneySaverLog wrote: »

So in the first year, if over the life of the sharesave you pay in £15,000 are you allowed to sell £25,600 worth Given your CGT Allowance of £10,600. Then are you allowed to put in a further limit to the annual ISA allowance.

It's a little more complicated:

Example 1:

Let's say you had paid in £15,000, and the shares are now worth £40,000 (total capital gain of £25,000).

Total value you can sell this year free of CGT is:

£10,600

---

x £40,000
£25,000

= £16,960


Example 2:

Let's say you had paid in £15,000, and the shares are now worth £31,000 (total capital gain of £16,000).

Total value you can sell this year free of CGT is:

£10,600

---

x £31,000
£16,000

= £20,538



Example 3:

Let's say you had paid in £15,000, and the shares are now worth £24,000 (total capital gain of £9,000).

In this case you can sell them all.

MoneySaverLog wrote: »

If the option date is 1st April, are you able to do two lots in a S&S ISA to shelter around another 20K or do you have to wait for the shares first to arrive given the close proximity to the tax year border?

Interesting. It would seem logical that you can shelter the 20k, if your scheme administrator will let you do the transfer-to-ISA in 2 lots, in the two different tax years. However, I haven't come across this before.

chris_m

MoneySaverLog wrote: »

So in the first year, if over the life of the sharesave you pay in £15,000 are you allowed to sell £25,600 worth

You need to be careful here - I think it's best to base everything on the share prices (option price and sale price), not the total of what you put in and got out, just in case you do need to spread the sales across multiple tax years.

If the option date is 1st April, are you able to do two lots in a S&S ISA to shelter around another 20K or do you have to wait for the shares first to arrive given the close proximity to the tax year border?

Timing could well be an issue in this case. You need to have your hands on the shares before you can instruct transfers - however it may be that, like mine, the option allows you to have the shares put into a holding account (mine is EasyShare through Equiniti) so you wouldn't need to actually physically have the share certificates. That could make a big difference to whether or not you could get the timing right so close to the tax year changeover.

It may also be possible that one of your options is to have an ISA opened for you and the shares put straight in there, which would also help with the timing. Obviously, you need to have planned for that by not contributing to another ISA in that tax year.

My own plans do not involve having an ISA opened because I already have one - so I don't want another, which I will then have to pay to close. This site is, after all, about saving money

chris_m

Perelandra wrote: »

Interesting. It would seem logical that you can shelter the 20k, if your scheme administrator will let you do the transfer-to-ISA in 2 lots, in the two different tax years. However, I haven't come across this before.

One possibility, if the adminstrators can't cope with two ISA transfers automatically but do offer the option to have an ISA opened within their system and stick a year's allowance-worth in it whilst retaining the remainder in a holding account, would be to initially do that.

Then in the following tax year, i.e. at least a week later but within 90 days, open another S&S ISA somewhere else and issue instructions to have the remainder, up to the allowance, transferred to that.

chris_m

BTW, something I omitted because it doesn't apply to me. If one is married, then one can, I believe, give some of the shares to one's spouse - thereby potentially getting two bites at the CGT allowance in the same tax year.

chris_m

If anyone might find it useful, I knocked up a spreadsheet a while back to help colleagues plan their options for our scheme, I've just tweaked it to make it a little more generic.

It offers scenarios for both singletons and couples to project for;
1) Getting as much tax-free money as possible using an ISA twice.
2) Getting as much tax-free money as possible as early as possible by using an ISA just once.
3) Getting as much tax-free money as possible without using an ISA if, for example, one's ISA is already committed.

It's all based on a scheme that matures at the end of August 2014 so you would need to make allowances for different maturity dates.

On each sheet you can enter/edit the values for the amount saved per month, the option price, the current share price, the ISA annual allowance and the CGT annual allowance. It will then detail what you need to transfer/sell and when.

Note that it should only be used as an indication of what you might be able to do, there are too many variables to give a 100% accurate plan. It will be up to you (and me) to check all figures at the time before issuing any instructions. Hopefully, it will be of help though.

Here it is, in Excel 2010 format. I don't have any other versions or software to try it out with.
http://www.f22.org.uk/sharesave/Sharesave_Maturity_Planner_2.xlsx

saved as Excel 97-2000 format - I "think" it will work, but I don't have any other versions or software to try it out with.
http://www.f22.org.uk/sharesave/Sharesave_Maturity_Planner_2.xls

Perelandra

The second one seems to open fine in Excel 07, although it told me it was the Excel 2003 format.

If the prices in there are indicative of the option price and shareprice in your company, then I need to switch employers!

chris_m

Perelandra wrote: »

The second one seems to open fine in Excel 07, although it told me it was the Excel 2003 format.

Cheers, glad to hear it does open OK.

If the prices in there are indicative of the option price and shareprice in your company, then I need to switch employers!

Too late, you'd have needed to have done that three years ago :rotfl:

Still, there's 18 months to two years to go yet. Anything could happen yet, so I'm not counting chickens yet, just anticipating them. I have all my fingers crossed, all my toes crossed, in fact everything crossed including my eyes :rotfl: