BT Employee Share Ownership Scheme 1984 to 2001 and Capital Gains Tax

dansakman

I worked there for over 10 years. Between 1990 and 2000 I received some free shares each year.  Each such batch was held in trust for 3 years and then transferred to me. 

Now I have sold them I had thought that the base cost for Capital Gains Tax would be the market value on the day they transferred into my name. This is what I have read elsewhere e.g. on HMRC websites. 

However, this website 

https://www.bt.com/about/investors/individual-shareholders/uk-individual-capital-gains-tax-and-your-bt-shares

seems to be suggesting that the base cost is the market value at the point at which the shares were allocated to me and held in trust i.e. 3 years earlier.

There are a lot of former BT employees out there and some must have sold shares. Does anyone know please?

More_complicated_than_that

Your mention of three years sounds like you:

1. Were granted an option to buy shares.

2. You saved money each month for three years.

3. You got a bit of interest at the end of three years.

4. You exercised your option and used the savings plus interest to buy the shares.

If that is right, then your base cost will be the price you paid (i.e. your savings plus interest).  These then go in to the pool from the date you bought them.

If you really mean a five year plan (e.g. directshare/yourshare/allshare shares) then your base cost is normally the market value on the day you took out the shares (but it might be a bit different if you took your shares out between three and five years and weren't a "good" leaver - e.g. you just resigned and didn't retire).  

dansakman

Thanks for replying.

Some more information that might help....

This wasn't an option to buy shares. They were "free employee shares". They were not part of BTs "sharesave" scheme which was a separate scheme running at the time. They were not part of any executive share option deal (BT’s Share Incentive Award and Global Share Option Plan). It was an all employee thing. 

Being held in trust for exactly 3 years seems to be part of the T&Cs of the scheme. I left the company in 2000 under voluntary redundancy and didn't get the shares from 1998 until 2001, the shares from 1999 until 2002 and the shares from 2000 until 2003. I had no control of this transfer to my name. If was a function of the trustees of the scheme and was done on the 3 year anniversary of the initial allocation.

More_complicated_than_that

dansakman said:

Thanks for replying.

Some more information that might help....

This wasn't an option to buy shares. They were "free employee shares". They were not part of BTs "sharesave" scheme which was a separate scheme running at the time. They were not part of any executive share option deal (BT’s Share Incentive Award and Global Share Option Plan). It was an all employee thing. 

Being held in trust for exactly 3 years seems to be part of the T&Cs of the scheme. I left the company in 2000 under voluntary redundancy and didn't get the shares from 1998 until 2001, the shares from 1999 until 2002 and the shares from 2000 until 2003. I had no control of this transfer to my name. If was a function of the trustees of the scheme and was done on the 3 year anniversary of the initial allocation.

OK. This sounds like an APSS.  This was an all-employee share scheme.  For completeness though, at that time BT did have discretionary share schemes where shares vested after a three year period.  However, relatively few people would have participated in the discretionary schemes and, with the discretionary schemes, PAYE/NIC would have been operated on vesting (from 1996 or so onwards anyway).

The replacement to the APSS (the SIP) is as you thought (CGT base cost equals market value on the date that the shares are transferred to you from the SIP trust). However, the old APSS was not as generous as the SIP.

With an APPS, the CGT base cost was the market value when they were set aside for you (i.e. at the start of the three year period).  I think in the late 1990s the maximum value of shares that could be set aside for you (in a tax year) could not exceed the higher of (i) £3,000 or (ii) 10% of your annual earnings (subject to a cap of something like £8,000).  Does that ring a bell?

So looking at your link, I think it is this plan: https://www.bt.com/about/investors/individual-shareholders/uk-individual-capital-gains-tax-and-your-bt-shares/uk-employee-share-ownership-scheme   This talks about the "initial value" which makes sense.  It also notes that you can only use 77.544% of the initial value as the base cost because of the O2 demerger.

dansakman

Yes that's the scheme BT ESOS run from 1984 to 2001. So it predates the "Share Incentive Plan" which was introduced in the finance act 2000. It does sound like I need to believe that BT websites statement about base cost at appropriation date rather than transfer.

It would be nice to find this written down somewhere else so I can make a good case of capital loss on my 23/24 self-assessment.

In practice I've done the maths both ways as I have all the paperwork covering appropriation "Initial Market Value" and evidence of transfer dates and market value at that time. Either way BT represents a nice fat capital loss to offset against my other gains

dansakman

I found this which echoes what you have said

https://www.employment-studies.co.uk/system/files/resources/files/373.pdf

Approved Profit-sharing (APS) and Employee Share

Ownership Plans

APS schemes are share-based profit related pay schemes. They of

a deferred rather than current distribution type. As such, the

reward is not paid instantly but withheld for a period. The

company makes tax-deductible payments to a trust, which buys

shares in the company and appropriates them to scheme

participants. All employees (including part-timers) with five

years’ service must be eligible to participate on similar terms, but

most companies accept those with much shorter service. The

shares must be left in trust for at least two years, and are free of

income tax if left in trust for a further year. The employee pays

Capital Gains Tax (CGT), if appropriate, on the difference

between the sale price and the value of the shares when first

awarded. Under the Finance Act 2000, these schemes are being

phased out. The Inland Revenue will continue to approve

schemes until 5 April 2001, and no further tax-free awards can be

made after 31 December 2002.

APS is to be replaced by Employee Share Ownership Plans

More_complicated_than_that

It's going to be difficult to show you in the legislation that that is right in a way that will convince you.  But here goes. First section 238 TCGA 1992 says that the employee is treated as absolutely entitled to the shares as against the trustees of the scheme from the date of appropriation. That says nothing about the base cost though. So you then have to look at s17 TCGA which says that as you have acquired the shares in circumstances related to your employment, your consideration is treated as being their deemed market value at the date of appropriation (i.e. the date that they are set aside for you rather than the date that they are transferred to you).

The Inland Revenue used to publish booklet and guides on share plans.  If you are interested, have a look at the government's archive website, find Inland Revenue then look for something like 'employee share schemes' on the earliest saved version of the website. That should lead you to something. Or else do a search for APSS and see what happens.  Another idea might be to see if there is anything in HMRC's CGT manual. It might be briefly mentioned nowadays but more likely to be in one of the archived versions. 

dansakman

Thanks for providing vital clues. Much appreciated. Think I've got enough evidence.