£100k lifetime CGT relief

ilgitano.2015

Hello all,

I've come into some shares from my employer via a share incentive scheme. I bought the shares for about £5000 when the company went public 2 years ago, and they're worth £50k-£60k now. I've never traded shares before. Looking around, there is no tax on the first £6000, ok, but looking at this gov website www.gov.uk/tax-employee-share-schemes/employee-shareholder-shares.

According to that: From 17 March 2016 you only pay CGT on gains over £100,000 that you make during your lifetime. My EMI shares agreement was made in 2019.

Am I eligible for that? If not, who is? I have found no references to that anywhere else.

MDMD

Employee shareholders are a particular class of employees that in exchange for giving up some employment rights, get some advantages, such as the CGT benefits you mention.

https://www.gov.uk/employment-status/employee-shareholders

Jeremy535897

Have you checked with the company to ensure that your shares are within this scheme?

ilgitano.2015

I've asked twice now, and still waiting for an answer. We have an explicit EMI agreement from 2019. Something may have happened to disqualify the company from the scheme though. I'm trying to find out if we're still within the scheme or if we've been disqualified, what it was that disqualified us. Still waiting for an answer.

What kind of things would disqualify this? I've heard it could be more than 250 employees, which might have been the case, or company valuation or revenue limits?

More_complicated_than_that

ilgitano.2015 said:

Hello all,

I've come into some shares from my employer via a share incentive scheme. I bought the shares for about £5000 when the company went public 2 years ago, and they're worth £50k-£60k now. I've never traded shares before. Looking around, there is no tax on the first £6000, ok, but looking at this gov website www.gov.uk/tax-employee-share-schemes/employee-shareholder-shares.

According to that: From 17 March 2016 you only pay CGT on gains over £100,000 that you make during your lifetime. My EMI shares agreement was made in 2019.

Am I eligible for that? If not, who is? I have found no references to that anywhere else.

If you bought the shares, they are not exempt employee shareholder shares and so the £100,000 exemption does not apply.  These are shares that people could have got for free by giving up certain (token) employment rights.  You would have received advice from a lawyer about that.

If you had an EMI option that you exercised when the company went public then any income tax would have been due when the shares were acquired.  So that's all sorted(*) -  * = terms and conditions apply.

Any disqualifying event after you exercised your EMI option is just not relevant.

So you pay CGT on the gain you make when you sell them.  There is a question around whether you get business asset disposal relief (tax rate = 10%) or pay normal CGT rates.   The answer that depends on your facts.  Your employer may help explain that, or they might not. 

It now gets more complicated: Here is a link to HMRC's manuals on it: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64052  You also have to think about other shares that you've bought (and might acquire in the next 30 days) as the matching rules are different to normal ones when you hold shares from an EMI scheme. Also, take care about whether it is a good idea to transfer shares to a spouse or not before sale.  If BADR available it's not necesarily a good idea (but might be).

xylophone

https://www.gov.uk/tax-employee-share-schemes

may be worth a read.