Share incentive plan - tax

HermanG

Hi,

I have been asked by HRMC to do a self-assessment, so I went to a tax advisor but I disagree with what he has done.

I have paid into a Share incentive plan, where I pay £100 a month and get one free share for everyone I buy. My understanding was that when I sell them after 5 years I do not have to pay income tax, nor would I have to pay CGT if I sell them straight out of the plan.

He put them into the capital gains tax section and it looks as if I have been taxed on them. what is the correct way to put them into the form?

eskbanker

https://www.gov.uk/tax-employee-share-schemes/share-incentive-plans-sips confirms your understanding, assuming the scheme is compliant with HMRC regulations, so if your advisor has put figures in the wrong place and caused an unwarranted tax liability then he needs to get that corrected....

Jeremy535897

Did your adviser not ask you to review the tax return before submitting it? That is what a tax adviser should do. That would have been the best time to raise the issue.

HermanG

Jeremy535897 said:

Did your adviser not ask you to review the tax return before submitting it? That is what a tax adviser should do. That would have been the best time to raise the issue.

yes, that is why I am asking.

eskbanker said:

[link removed] confirms your understanding, assuming the scheme is compliant with HMRC regulations, so if your advisor has put figures in the wrong place and caused an unwarranted tax liability then he needs to get that corrected....

unfortunately that does not say how or if they need to be mentioned. I could understand if they need to be mentioned, but it does not say how you distinguish a sell of such shares from a sale of "normal" shares.

Jeremy535897

I am not clear whether you reviewed the tax return or not, before it was submitted. However, there is no need to declare disposals of shares that are exempt from capital gains tax.

HermanG

thanks for looking into my issue Jeremy. the tax return was not yet submitted, I have it here for my review and hence ask the question if these disposals need to be declared in the capital gains section.

I cannot add links yet, but found "Capital Gains Tax summary notes" on the HRMC website. It seems that since the total value of the shares was less than £12,300 there is no way I could have gained that amount, so there is no need to include them at all.

on closer inspection he has included them but then made the capital gains as "0".

I guess my lesson learned is not to take a cheap(ish) online tax advisor

Jeremy535897

You only need to declare capital gains, when you already have to complete a self assessment tax return for other reasons, if the total proceeds exceed £49,200, or the capital gain exceeds £12,300. However, you don't include exempt assets in these figures, so there is no reason to disclose these sales at all.

eskbanker

HermanG said:

on closer inspection he has included them but then made the capital gains as "0".

I guess my lesson learned is not to take a cheap(ish) online tax advisor

Or another lesson would be to read the provisional return more carefully and direct any queries to your advisor, as you're paying him for doing this - if the draft return states zero capital gains then there's no reason to believe that "it looks as if I have been taxed on them", or was there a full calculation included that suggested that tax would be applied to these?

HermanG

eskbanker said:

HermanG said:

on closer inspection he has included them but then made the capital gains as "0".

I guess my lesson learned is not to take a cheap(ish) online tax advisor

Or another lesson would be to read the provisional return more carefully and direct any queries to your advisor, as you're paying him for doing this - if the draft return states zero capital gains then there's no reason to believe that "it looks as if I have been taxed on them", or was there a full calculation included that suggested that tax would be applied to these?

thank you for your advice. I think asking two people is always better than one, especially as this advisor also made another mistake in the return.