Taxation rules for free company shares

flakey321

Hi,

I wonder if someone could advise me about the tax position of shares I hold in a company I used to work for, i'd assumed they'd just be taxed for capital gains like regular shares but have seen contrasting views on it. The shares were given to me for free about  20 years ago, they weren't part of a share save scheme, just given to me. I was just a regular employee in the UK, the company is a large american consultancy and the shares are in US dollars and held by an American stock broker.  So if I were to sell them is it a simple case of i'll be taxed at the price they are now minus the price at the time they were gifted to me or are they exempt from captial gains tax which i'd read in one place (which i'd like but seems to good to be true!). I have a W8-BEN form that I renew about every 3 years to say I'm a foreign national and not subject to US tax regulations.

Any comments or references appreciated.

Thank you guys

housebuyer143

I dont believe they are free from capital gains. I have some free company shares to be cashed in and I would also be interested to hear how the captial gains is calculated, as no idea the buy price when they were given to me. 

Vortigern

Surely the acquisition price of free shares is exactly what you paid for them. Zero, zilch, nothing, nowt, £0.00, $0.00

The entire proceeds of your share sale (after allowance) will be liable to CGT.

TiVo_Lad

See 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

The section "Unapproved employee share or securities schemes" would seem to apply here.

stuart321

In my experience (UK employee, US employer, shares given at 0 cost, non-approved scheme) - income tax paid at time of receiving shares based on market share price at that time, difference in eventual sale price vs mkt price at time potentially subject to CGT.  If there was no income tax deducted then total value potentially subject to CGT.
There is an annual exemption allowance for CGT (£6k for 23/24).
If the total value of the shares is <£6k and you have no other capital gains in the year then no issue, if you sell them in tranches each tax year each time under the AEA then no issue.

Aretnap

Vortigern said:

Surely the acquisition price of free shares is exactly what you paid for them. Zero, zilch, nothing, nowt, £0.00, $0.00

The entire proceeds of your share sale (after allowance) will be liable to CGT.

For CGT purposes it's generally the value at the time of acquisition (and disposal) that matters - not the price paid. Obviously if you buy shares an other open market the acquisition price and the market value will be the same, but if you are gifted them, or if you manage to buy them for less (or more) than market value then when you sell them you'll be taxed on the change in market value. Similarly if you give shares away (other than to a spouse etc) you'll be liable for CGT as if you'd sold them at market value, even though you didn't actually get any money for them.

Life may be more complicated than this if the shares come from an employer; there may be income tax considerations as well.

jimexbox

A company I worked for give everyone shares as thank you. I left and when the redemption period ended, I sold them through a third party portal used by my ex employee. 

I paid income tax at the rate at which I paid when received them, higher rate. Even though I was on the lower tax band when sold. I can't remember if I paid NI, a few years ago. 

dealyboy

I don't think my case applies here but it might be useful for a reference ...

I vested some shares in my ex employers share plan last year. This was a scheme whereby employees were gifted shares, the number based on seniority and length of service, which could be sold or vested from a future date. I decided to vest them from the share plan to be held in an account with a shares platform. I paid income tax and national insurance (refunded) deducted initially by the shares company and reconciled later by my ex employer's payroll dept. I reclaimed the income tax from HMRC via a P55.

I can now sell the shares whenever I like without any liability to tax.

flakey321

Thank you all for your comments, very helpful and appreciated