Employee Discounted Stock Purchase - Tax implications

djohnst

My employer offers an 'Employee Discounted Stock Purchase' plan whereby I can elect to have up to 10% of my gross salary taken by payroll deduction and invested in company shares. On top of the amount I contribute, my employer will top up a further 15%.

It seems that I will not be the 'owner' of this stock and that our trustee (Computershare) will own them on my behalf.

Can anyone advise on what my tax situation is here? We are a global organisation and so HR are reluctant to offer anything even approaching advice on local tax requirements.

I need to check but I'm making a broad assumption that I will still pay tax and NI on the earnings I use to purchase the shares despite using payroll deduction - The alternative is too good to be true.

I did check the .Gov.uk page on employer share schemes - https://www.gov.uk/tax-employee-share-schemes/overview - but none seemed to match the profile of this one.

Dead_keen

If it is not a tax advantaged plan (and your link is to the right place to check) then you will use your post-tax pay to buy the shares. So you are right.

In terms of being the owner, that depends on the specifics of the plan but it is very likely that the trustee will be your bare trustee (also known as a nominee). If that is the case then you will be the owner for tax purposes.

When you buy shares cheap, then you will pay PAYE/NIC on the cheapness (so if you pay $85 for $100 of shares you will pay PAYE/NIC on the £ equivalent of $15).

When you sell them, you will potentially pay capital gains tax. In simple terms, the gain is based on the increase in value between the date you buy them and the date you sell them. But the reality is that the capital gains tax 'matching' rules make this a lot more complicated as it depends on what other shares you own in the company, when you buy them and what other shares you buy in the company in the next 30 days (which may be relevant if you buy shares monthly under the plan).