Vested RSUs,UK taxation and SA

trs2

in 17/18 some RSU vested ( from US employer).
At the time of vesting, the month's payslip shows the value of the RSU as income ( converted from USD to GBP).
The income tax and NI values that particular month correctly reflect this additional income and accordingly the P60 shows the increased income and increased tax that the vested RSU generated.
That would make sense, except:
The particular payslip also includes an extra deduction figure regarding the RSU. This appears to correspond to the converted value in GBP of the shares that were sold automatically at time of vesting. ( just over 50%)

1. Does this not mean that taxation has been duplicated? Once through normal PAYE and second via the automatic sale of shares to cover taxes?
A w8-ben form was filled originally and the broker holding the shares has confirmed that the shares that were sold,were sold by the employer to cover ( UK) taxes.

2.If understanding above is correct, is there any way to remedy via self assessment return? At the moment the p60 figures are used in the employment section but no obvious place to show the other deduction at source by sale of shares for tax purposes.

Anyone else been in this situation? Any help in understanding this would be appreciated.

londoninvestor

I was in a similar scheme in a previous job. Just dug out an old payslip to check.

In my case what I see in the "Deductions" column is:

1. The "tax paid" item, which of course was on every payslip, but for this month was increased to represent the tax due on the vested RSUs.
2. A "RSU withholding" item which reflects the value of the shares automatically sold ot meet the tax liability

Now, #1 is a positive deduction, but #2 has a negative sign, i.e. it offsets the "Tax Paid" item, precisely to avoid double counting.

So, making up some numbers, let's say the payslip shows:
Tax Paid = £5,000
RSU Withholding = -£4,000

---

Total deduction = £1,000

That means that I'd have paid £1,000 through PAYE in that pay period. £1,000 through PAYE plus the £4,000 value of the automatically-sold shares, meets my £5,000 tax liability.

If your employer has done the same, then you should be OK from an income tax perspective and your P60 will reflect both the tax due, and the tax paid, on the value of the shares.

(Remember that when you sell the remaining vested shares that will generate a loss or gain for CGT, but it doesn't further affect your income tax.)

trs2

Thank you for looking up your old payslip. Appreciated.

Sadly in this case the deduction item worded 'net deposit (RSU)' is a positive figure so it is an extra deduction on top of the already greater Income tax and NI that is usually deducted.

Should this be taken up with HMRC or at employer level?

trs2

It would be good if it could be adjusted via SA as a tax return has to be completed anyway. But no obvious place. The value of RSU given is swallowed up within the P60 income value. The value of tax paid through PAYE is in the P60 figure for tax but nowhere obvious to put the other extra deduction figure from the sales of the shares

londoninvestor

trs2 wrote: »

Sadly in this case the deduction item worded 'net deposit (RSU)' is a positive figure so it is an extra deduction on top of the already greater Income tax and NI that is usually deducted.

Just to check a couple of things here:
a) That sounds as if it should be offsetting an entry in the "Payments" column of the payslip, so that the two entries together would represent "you've earned £X taxable pay this month, but we've given £Y of it to you in stock, so we need to subtract that from the actual cash in the month's pay packet". I guess there isn't such an offsetting entry on the left of the payslip?

b) Does this "Net Deposit" figure correspond to the value of the shares that were sold to meet the tax liability, or of the shares that remained after that and were put into your broker account?

trs2 wrote: »

Should this be taken up with HMRC or at employer level?

If your P60 shows
(i) the correct figure for your total taxable pay
(ii) and also the correct figure for the tax that has actually been deducted, both through cash and stock sales, regardless of how much tax should have been deducted,

then doing your SA return should indeed bring you back to the correct position, i.e. refunding you if your employer has over-deducted tax - or indeed requiring an extra payment from you had your employer under-deducted.

It would still of course make sense to bring this to your employer's attention to save you similar hassle in future years, not to mention your colleagues!

jimmo

I am not really sure if I am following all that has been said here but a couple of points.
1) When the RSUs vested you were entitled to all of them. They all became yours momentarily. At that time your payslip should have reflected the UK value of the entire entitlement. Immediately upon vesting your employer sold some of the RSUs on your behalf in order to generate enough cash to satisfy the PAYE requirement.
2) If your payslip correctly recognises the full UK value of all of the RSUs you were entitled to (including the RSUs sold on your behalf) and additionally recognises the value of the shares sold on your behalf I think that something is wrong with your payslip.

I wonder whether your payslip just reflects the values of the RSUs actually passed to you and those sold on your behalf separately but if not you will most definitely need to take it up with your employer. HMRC will take your P60 figures as Gospel an woe betide you if you enter different figures in your Self Assessment Return.
Actually, why don't you do your Return now, even if it is just to the stage where you can see a calculation of your liability?

solnarch

I have a similar issue with a combination of awards made by HP (US company) to me, one set was a PRU (performance related unit), the second was a Long Term Cash (LTC) award and the final was an RSU. These were awarded by the US company and administered by Merrill Lynch, in the US. Checking my payslips I see the GBP equivalent cost of the award at the time of vesting being included on my taxable income column and then subsequently deducted from the deductions column - I believe this was just a way to have income tax deducted for the value of the vested award with out paying me twice, as the shares were held by Merrill Lynch and not me directly. I also noted there was a negative vale deduction that appears to be for the value of the Merrill Lynch withheld US tax  (typically 47% value of vested award) which I "think" is HP compensating me for the US tax as I was paying tax in the UK and this avoided the double taxation problem. If this understanding is correct, then I just want to check that when calculating the capital gain tax for the sale of these awards that I can use the market value of the shares at the time of vesting as the cost basis of the CGT calculation?
Finally, as the LTC award was a  cash award in USD and I appear to have paid income tax when it vested, then do I need to report the sale  (transfer of cash from Merrill Lynch to my UK bank account) in my tax return, if so where ?

What is the difference between a PRU and an RSU ?

many thanks

Smccran

Hi all,
I've got what might be a typical situation, but am struggling to see the right way to record all of this in my self assessment return without creating what appears to be a double taxation.

A set of RSU's recently vested, and my employer has added them to my payslip. Let's say that 55 vested and out of those, 25 were sold to cover tax and I actually got 30. On my payslip there is a 'tax withheld' amount, which I'm guessing is the value of the rsu kept behind. (Those 25). Now, when completing a return for the end of year, the value of the 30 shares that vested is added as income on the P60. But the tax withheld amount doesn't seem to be factored in anywhere? 
If the vested shares are shown as income, surely that will count towards the total income I should be paying tax on, making my tax liability higher? But I've already lost 25 shares as tax on those?
Does anyone know the normal way of recording RSU's on a self assessment return?

EdSwippet

Smccran said:

I've got what might be a typical situation, but am struggling to see the right way to record all of this in my self assessment return without creating what appears to be a double taxation.
...

Separate thread: https://forums.moneysavingexpert.com/discussion/6234071/advice-on-rsus-in-a-self-assessment