Employee Share Incentive Plan (SIP) - taxation after redundancy

2chairs

Hi, I'm looking for some help. I had a share incentive plan (SIP) with my employer (I made monthly contributions and was given matching shares and dividend shares) from 2015 but was made redundant in 2020. As such I understand there was no income or other tax to pay at the time of my redundancy. I'm now thinking of selling some of the shares but am a bit confused as to whether they would be subject to Capital Gains Tax and if so what the base cost I should use for the shares is (is it the market value at the date of my redundancy)? Unfortunately, my ex-employer has never provided much information or help with this scheme and I'm finding the government website a bit confusing. Any advice will be gratefully received! many thanks

eskbanker

The base cost for CGT purposes is the date of acquisition, so hopefully you'll have kept adequate records to support a calculation from that....

More_complicated_than_that

2chairs said:

Hi, I'm looking for some help. I had a share incentive plan (SIP) with my employer (I made monthly contributions and was given matching shares and dividend shares) from 2015 but was made redundant in 2020. As such I understand there was no income or other tax to pay at the time of my redundancy. I'm now thinking of selling some of the shares but am a bit confused as to whether they would be subject to Capital Gains Tax and if so what the base cost I should use for the shares is (is it the market value at the date of my redundancy)? Unfortunately, my ex-employer has never provided much information or help with this scheme and I'm finding the government website a bit confusing. Any advice will be gratefully received! many thanks

Your base cost is their market value on the date the shares left the SIP trust.  That will be around the date you were made redundant but you might have the exact date on the letters you got when the shares were transferred into your name.  If you know when that was, you can look up the historic price via your favourite search engine.  That would be your CGT base cost if these were the only shares in that company you had.  Otherwise the normal CGT matching rules will apply.

More_complicated_than_that

eskbanker said:

The base cost for CGT purposes is the date of acquisition, so hopefully you'll have kept adequate records to support a calculation from that....

That's not quite right.  The tax legislation deems the participant to have been disposed of the shares, and then reaquired them immediately for market value, when they ceased to participate in the SIP (para 5(1) Part 7D TCGA 1992)

jaypers

If they are sold from within the scheme they are exempt from CGT. As it was 2020, I presume that you have transferred them to a broker account, at which point they become liable to CGT rules. I’m not sure how the calculation works though and whether it is the difference in price between transfer date and now, or the original purchase price etc.