Gifted Shares - Tax

ShadeUK

Hi all, I've tried searching for an answer on this but I haven't found anything definitive.

My company awarded me 4000 shares worth £10,000 at the time they were awarded.  They don't become mine until November this year (3 years from when they were awarded). 

If I sell the shares are they subject to income tax or capital gains tax?  I was thinking that if I've received them for free and sell them, does that quality as capital gains on an asset.

What if I gift them to my wife?

I am a higher rate of tax payer and she isn't.

I may be way off here.  I'd appreciate any help on this.

Thanks

cloud_dog

Assuming this is not a tax regulated SAYE scheme then the sale would be subject to CGT, if applicable.

Luckily for you the current CGT exemption limit is £12k.  You could gift some / all to your wife to use her CGT allowance, or you could sell some in one FY and some in the following FY.

xylophone

https://www.gov.uk/tax-employee-share-schemes
Is it covered in the above?

ShadeUK

Thanks both for your replies.

It's not a SAYE scheme.  It's effectively a gift from the company for good performance.  As you have to wait for 3 years to receive them it acts as an incentive to stay with the company.

I'd read about the CGT free personal allowance and hoped it would qualify under that.  From what you're syaing cloud_dog you agree?

Keep_pedalling

ShadeUK said:

Thanks both for your replies.

It's not a SAYE scheme.  It's effectively a gift from the company for good performance.  As you have to wait for 3 years to receive them it acts as an incentive to stay with the company.

I'd read about the CGT free personal allowance and hoped it would qualify under that.  From what you're syaing cloud_dog you agree?

As this sounds like you were simply gifted the shares then I think the hit is going to come in the form of income tax. 

xylophone

https://www.gannons.co.uk/expertise/shares-for-employees/private-companies/gifting-shares/
What information have you been given by the company relating to tax treatment?
Otherwise check with HMRC.

ShadeUK

Hi Keep_pedalling - thanks for your reply.  Once I receive them I guess I become shareholder to the 4000 shares.  If I gift them to my wife - would she be hit for income tax on them or CGT? Forgive my ignorance - why does it relate to income tax and not CGT if I sell them? I thought I would be a profit from the sale of an asset?

xylophone - thank you I'm going to check that link out now.  The company have not given me anything relating to tax treatment for these.

oldbikebloke

ShadeUK said:

 I thought I would be a profit from the sale of an asset?

in principle yes, CGT, however, you simply do not know what you have been given and how it was administered 

On face value of your opening post you have simply been given an extra £10,000 as a one off bonus with the condition it is "payable" after 3 years. In that sense it is simply extra salary subject to income tax and national insurance. Have you physically had to pay for these shares, or are they cost free?

You need to find out from your company exactly what they have done and therefore if it is a scheme (of which there are 4 types)  or not, as the former are subject to CGT, not income tax 
https://www.gov.uk/tax-employee-share-schemes/share-incentive-plans-sips

Once the shares are in your name you can certainly gift them to your wife free of any immediate tax implication as that is simply a gift between spouses which defers the CGT to her when she sells them