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Employee Share Incentive Plan... Feeling ripped off, is this Right??

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  • jacko74
    jacko74 Posts: 396 Forumite
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    edited 12 June 2021 at 7:26AM
    Thank you for all the replies, I suppose it's good to know that what has occurred in this case is at least technically ''correct'' if to my mind still not morally or ethically fair.

    It's effectively just a form of stealth CGT that only applies to people taking part in these schemes who for whatever unexpected  reasons aren't able to remain with the employer and hold the shares for the required period of time to negate the tax liability on them. 

    It might have been a bit fairer if there was at least an option where even though I'm leaving the employer the shares can remain untouched in the scheme administrators account for the full period instead of me being forced to remove them and pay this stealth CGT.

    Out of interest I wonder in the same situation if the shares had crashed and ended up being worth next to nothing would the tax liability still be based on the value of those worthless shares?... Or would that liability then magically revert back to being the £500 that I avoided paying on my earnings when purchasing them instead?
  • jacko74
    jacko74 Posts: 396 Forumite
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    edited 12 June 2021 at 7:36AM
    kidmugsy said:
    It's my observation over the years that when a poster objects to being "ripped off" he almost always has a feeble case.
    And thank you for that invaluable contribution to the discussion, I deliberately phrased it as saying I was ''feeling'' ripped off rather than saying I had definitely been ripped off in order to try and hopefully avoid the usual worthless, snooty responses which add no meaningful contribution to a thread... but I suppose there's always going to be one isn't there.
  • kuratowski
    kuratowski Posts: 1,415 Forumite
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    edited 12 June 2021 at 9:23AM
    jacko74 said:
    Out of interest I wonder in the same situation if the shares had crashed and ended up being worth next to nothing would the tax liability still be based on the value of those worthless shares?... Or would that liability then magically revert back to being the £500 that I avoided paying on my earnings when purchasing them instead?
    • If you hold for less than three years, the "relevant amount" for tax purposes is the market value on the exit date, whether it is lower or higher than the cost.  [So, in the scenario you describe, it wouldn't revert back it would still be the market value.]
    • If you hold for over three years but less than five years, the "relevant amount" is whichever is lower, market value on the exit date or the cost (market value at acquisition date for free shares/matching shares).  [So, in the scenario you describe, it would be the market value if that were lower than cost.] 
    • If you hold for over five years, no income tax or NICs to pay.
  • Aretnap
    Aretnap Posts: 5,785 Forumite
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    TheAble said:
    I guess these are the rules but I do sympathise with the op. If the shares had been bought using taxed income, whether in an ISA or not, they wouldn't be facing an additional £1600 liability right now. @moneysavinghero you seem to be missing the point a bit.

    If he'd bought them with taxed income, he'd have had a smaller pot of money to buy shares with, so he would have made a smaller profit. It wouldn't actually leave him better of at the end of the day. 
  • Barny1979
    Barny1979 Posts: 7,921 Forumite
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    kidmugsy said:
    It's my observation over the years that when a poster objects to being "ripped off" he almost always has a feeble case.
    They not he? ;-)
  • kuratowski
    kuratowski Posts: 1,415 Forumite
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    I actually do have some sympathy for OP, they have suffered a tax bill they didn't expect (albeit absolutely correctly, according to the legislation) and who wouldn't feel inclined to vent.

    The best to get your own back on the tax man, if your age makes you eligible to open one, is to pay the net proceeds of the sale into a stocks & shares LISA, up to the full 4k allowance.

    Alternatively, if the new employer supports salary sacrifice for pension contributions, arrange to sacrifice some salary in exchange for a one off extra pension contributions.
  • Brie
    Brie Posts: 14,806 Ambassador
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    Isn't the issue that the share purchase is basically an employee benefit which is therefore taxable?  That it is a benefit is waived in part at 3 years and fully at 5.  Unless as mentioned depending on it not being the individual's choice to leave the company (i.e. redundancy or death) or retirement.  It's one of the reasons that share purchase is less popular than a share save scheme where the rules are less complicated so easier for individuals to understand.
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