Capital gains tax and dividends employer share scheme

RacingDriver

Hi,

I was hoping that somebody could help me with a few questions about an employer share scheme.  I had posted on the Savings & Investments board but I now think this board may be better suited.

1) I buy shares through an unapproved employee share scheme through monthly payroll.  My employer tops-up the amount I invest in the shares so in effect I get some free shares each month.  I pay income tax and NI on both my contribution and the employer top-up when the shares are purchased through payroll.  After reading this - https://www.gov.uk/government/publications/employee-share-and-security-schemes-and-capital-gains-tax-hs287-self-assessment-helpsheet/hs287-capital-gains-tax-and-employee-share-schemes-2020#unapproved-employee-share-or-securities-schemes - I think these are 'convertible shares' and that any capital gain is calculated as actual cost plus amount charged to income tax on acquisition and conversion.  I am struggling to understand how to calculate the capital gain from this information, using the example figures below I am not sure how to include the income tax previously paid in the capital gains equation?

My contribution £400

Employer top-up £100

Income tax and NI paid on £500

Bought 500 shares @ £1 each

Sold 500 shares @ £1.50 each

Capital gain (500*£1.50) - (500*£1) = £250

2) The shares I receive are restricted for 3 years.  After reading this - https://www.gov.uk/government/publications/employee-share-and-security-schemes-and-capital-gains-tax-hs287-self-assessment-helpsheet/hs287-capital-gains-tax-and-employee-share-schemes-2020#shares-subject-to-restrictions-on-disposal - if I understand correctly the restricted (owned less than 3 years) and unrestricted (owned 3 or more years) shares are two separate section 104 holdings?  How does this work at the end of the 3 year restricted period, do they just move to an unrestricted section 104 holding or is capital gains tax due on the restricted pool and then the cost basis starts afresh in the unrestricted pool?

3) I purchase the shares in GBP but then this gets converted as the shares are traded in a foreign currency.  Am I correct to use the GBP purchase/sale prices to calculate capital gains?

4) Dividends are paid once a year directly in foreign currency and re-invested without ever being converted to GBP, am I correct to use HMRC's published monthly exchange rate (https://www.gov.uk/government/collections/exchange-rates-for-customs-and-vat#monthly-rates) to convert the dividend to GBP and to use that value to calculate any dividend/capital gains tax payable?

Jeremy535897

The devil is always in the detail with these arrangements. Surely your employer knows how these arrangements are taxed?

Dead_keen

1. They are very unlikely to be convertible securities.  If they are then your employer would have had to operate PAYE on the conversion / disposal.  Assuming they are not (and pooling, etc is not relevant) then the gain is £250.  How you get there depends on the detail of how the plan works (e.g. it could be £750 - £400 you paid - £100 base cost given by s119A or it could be £750 - £500 base cost given by s17 and s149AA). 

2. They become part of the s104 holding - https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg51580

3. Yes, that is correct.

4. That's as good a way as any.