Buying Shares in US based Company

Birdman2015

I am looking at buying shares in the US based company I work fior. The price has fallen sharply in the recent past and now seems like the point to jump in.

I have registered with Hargeaves Lansdown but have had to send in a W8BEN form to allow me to deal in US based shares.

Are there any pitfalls or issues I should be aware of before investing? Is the tax situation any different for instance and any hidden charges I might face.

I am new to the share game so any advice will be gratefully received to avoid making an expensive mistake!

Linton

Only invest a small part of your money with your employer. Were the company to run into difficulties you dont want to lose your life savings as well as your job. To be a successful investor you need to invest broadly to minimise the possibility of any one event causing major losses. For anyone starting off this really means investing in funds rather than individual shares. However provided you exercise some caution you should be fine. Does your employer operate a share purchase scheme? Many US companies do and it makes buying, selling and tax much less of a hassle.

bowlhead99

You'll suffer US tax withholding at source, but can offset the amounts against any UK tax due on the same income.

From a capital gains tax perspective it is the same as it would be on a share in a UK company. The US won't seek to tax your capital gains if you're not a US person.

Obviously your UK tax obligations are eliminated if you buy the shares through an ISA. Linton's comments above are sensible. If trading in shares in your employer, make sure you are not doing it based on material non public information (like working in the accounts department or corporate acquisitions team and ignoring any close periods for trading) as you don't want the SEC to do you for insider dealing.

Birdman2015

There are no issues with insider dealing, I am not privy to any information that may affect stock prices.

The share price has dropped from around $70 to just over $12 in the past year, we are heavily dependant on oil and gas and this has been bad for business in the last year. The financial results released this week were not great either and this has resulted in a 30% decline in price since Monday. This has been my motivation to purchase some shares. Looking at previous slumps the price has recovered quite well in the short term and there is no reason to think it may do the same again.

I am looking at around £5K to invest, if anything disasterous happened I still have a good amount of money in savingsso not as if I am going to lose everything!

Maybe I am looking at it rather niavely but even a modest increase in share price will give me a better return than having the same amount in an average savings account?

Re US taxes, what typically would I face if lets just say the value of my 5K investment doubled over time?

bowlhead99

Birdman2015 wrote: »

Re US taxes, what typically would I face if lets just say the value of my 5K investment doubled over time?

If there were no dividends and it was just a change in the value of your investment which you cashed out: that's known as a 'capital gain'. The US wouldn't tax the gain if you're not a US citizen or resident.

The UK would look to tax your gain if it wasn't in an ISA, but you can cash out total gains of £11k a year before any tax is due. Everyone has an annual allowance or exempt amount. So if you didn't cash out over £6k of investment gains from other companies or funds or investment properties in the same UK tax year: there would be no UK tax to pay when you make the £5k gain on your company.

I guess you should substitute "when" you make the gain, with "if"

Thrugelmir

Birdman2015 wrote: »

The share price has dropped from around $70 to just over $12 in the past year, we are heavily dependant on oil and gas and this has been bad for business in the last year. The financial results released this week were not great either and this has resulted in a 30% decline in price since Monday. This has been my motivation to purchase some shares. Looking at previous slumps the price has recovered quite well in the short term and there is no reason to think it may do the same again.

This slump is different to previous ones. Fracking wasn't even invented. 30% fall in share price in a single day should be a very clear warning.

An OPEC production cut is unlikely until U.S. production declines by about another million barrels per day. OPEC won’t cut because it would accomplish nothing beyond a short-term increase in price.

Doshwaster

Birdman2015 wrote: »

There are no issues with insider dealing, I am not privy to any information that may affect stock prices.

Even so you should check what your employer's policy is on trading in the company's stock. We have blackout periods in which buying and selling are banned and that applies to family members too. While it is unlikely that I would be caught for small trades it really isn't worth the risk of falling foul of our own legal department and the US SEC as it could seriously damage future employability.