SAYE & Company Merger

tpurch

Hi,

I wonder if anyone here knows the answer to this?

I have SAYE plan that is due out now and usually if shares are sold it comes under Captial Gains Tax (assuming you reach the limits), however the company I am with maybe merging with another and has said that if the merger goes ahead shareholders will receive a cash sum x.xx per share then shares will be converted to the new company at a pro rata rate. My question is regarding the cash sum side of things, if I receive a cash sum per share will this be taxed by income or captial gains?

If its classed as income then would placing shares in ISA make any difference to the tax?

abitrubbish

Hi

This will be treated as a part disposal of the shares which will be taxed under capital gains tax.

Example: you pay £100 for the share under the SAYE scheme.
The company merges and you receive £50 and a new share worth £100.

You are deemed to have sold 50/150 = 1/3 of your original share making a gain of 50 - 33.33 = £16.67. This will be liable to capital gains tax, but unless you have made other disposals in the year will most likely be under your annual exemption (£9,200 for 2007/08).

The new share will have a deemed base cost of 2/3 of the original share, ie £66.67 so when you eventually sell it this is what you will base the CGT calculation on. Of course, if you put the shares in an ISA there will be no CGT.

Hope that helps!