How to fill in tax return after exercising options on an EMI scheme

EMcB88

Hi there, I wondered if someone could help guide me through how I should fill in my tax return this year.

I exercised my EMI options in Jan 2021. The exercise price is well below the grant value and therefore I understand I need to pay tax on the difference between the option price and the grant value. 

I think I have to declare this in the Capital Gains section of the tax return, is that correct?

Do I answer yes to this: Do you want to claim an allowable capital loss or make any other capital gains claim or election for the year?

They are Unlisted Shares

If this is the only thing I am declaring, would the number of disposals be 1? 
The disposal proceeds: would this be the number of shares x grant value?
The allowable costs: would this be what I paid to exercise my option? So the number of shares x exercise price?
Gains in the year: would this be the difference between the disposal proceeds and allowable costs? I.e. the number of shares x difference between grant value and exercise price 

It looks like I have to attach a Capital Gains attachment, do you think it's okay if it's a simple table showing the number of shares, exercise price, grant price etc.? I understand I cannot use the HMRC capital gains computation worksheet as I got my asset by the exercise of an option, is that correct?

Thanks in advance for your help!

Jeremy535897

It's not my area of expertise, but my understanding is that if the exercise price is less than the grant value, income tax is applicable on exercise, not capital gains tax. As the shares are unlisted, I assume that they are not "readily convertible assets", so this liability is dealt with through self assessment rather than PAYE, and NI is not due. See:
https://www.gov.uk/tax-employee-share-schemes/enterprise-management-incentives-emis
https://www.taxadvisermagazine.com/article/emi-–-simply-best

EMcB88

Ah ok. Thanks so much. So I fill in the Other UK Income Tax > Share Scheme section?

EMcB88

And the amount I put in as the taxable amount is the number of shares x difference between grant value and exercise price?

Jeremy535897

SA101 is the right form, yes. See this for full guidance:
https://www.gov.uk/government/publications/employee-shares-and-securities-further-guidance-hs305-self-assessment-helpsheet/hs305-employment-related-shares-and-securities-further-guidance-2021

Dead_keen

At this risk of getting a bit geeky, how do you know what the market value of the shares was on exercise?  If the market value was between the value at grant and the exercise price then the tax position is not quite as you described.  If the shares had restrictions on them (e.g. in articles or shareholders agreement) then you might also need to think about how those restrictions reduced the value of the shares (unless you made a s431 election). The timing of when you exercised your EMI option can also change things (e.g. there is the 90 day rule - do if you exercised your option four months after leaving then the tax position is again different).  You also need to be comfortable that there haven't been any disqualifying events.

MDMD

Dead_keen said:

At this risk of getting a bit geeky, how do you know what the market value of the shares was on exercise?  If the market value was between the value at grant and the exercise price then the tax position is not quite as you described.  If the shares had restrictions on them (e.g. in articles or shareholders agreement) then you might also need to think about how those restrictions reduced the value of the shares (unless you made a s431 election). The timing of when you exercised your EMI option can also change things (e.g. there is the 90 day rule - do if you exercised your option four months after leaving then the tax position is again different).  You also need to be comfortable that there haven't been any disqualifying events.

You usually agree the value with HMRC, often this involves getting an independent corporate finance firm to calculate a value and issue a report. Depending on the time gap you would either use the same value for both or get a new one prepared when the options are exercised.

https://www.gov.uk/government/publications/asset-valuation-request-for-a-share-valuation-val231