Clarification needed on 90 day SAYE shares to ISA transfer.

vacheron

Hi all. 

I am aware that on maturity of my SAYE scheme I am able to transfer some shares directly to my ISA, however cannot find any definative answer as to how the transfer value is determined.

The HMRC guidance page explains that the shares must be transferred within 90 days and will count towards my annual £20K limit, and that I will then not have to pay any CGT on any gains which I may subsequently make on disposal within the ISA (all common sense), but does not define "how" the shares are valued when I transfer them in.

Say for simplicity that I have a £10K SAYE pot with an option share price of £1 and current share price of £3

Will the shares be valued at £10,000 (the option price I just paid) and on the basis that I haven't yet disposed of them (which I would intend to do within the ISA when the capital "gain" would be realised), or is the transfer value be based on the current market price (£3) making the shares worth £30K and thereby only allowiing me to transfer 2/3rds of the shares into my ISA due to the annual 20K limit?

Any insights or pointers to somewhere that clarifies this would be much appreciated. 

Thanks.

eskbanker

I believe that its the current value of the shares that counts, rather than the option price - this appears to be endorsed by https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56451

In accordance with the ISA Regulations, if an employee exercises an option and acquires shares, he or she may transfer them directly to a stocks and shares Individual Savings Account (ISA) without any Capital Gains Tax consequences. The value of the shares transferred counts towards, and may be restricted by, the ISA limit for the year of transfer and must be made within 90 days of the date the employee exercises the option.

vacheron

eskbanker said:

I believe that its the current value of the shares that counts, rather than the option price - this appears to be endorsed by https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56451

In accordance with the ISA Regulations, if an employee exercises an option and acquires shares, he or she may transfer them directly to a stocks and shares Individual Savings Account (ISA) without any Capital Gains Tax consequences. The value of the shares transferred counts towards, and may be restricted by, the ISA limit for the year of transfer and must be made within 90 days of the date the employee exercises the option.

Many thanks @eskbanker It looks like the section you highlighted does imply the current market value. 

I was wondering what to do if this was the case which gave me another thought:

If the donor ISA for the SAYE shares is a flexible S&S ISA, what prevents me from:

• Transfering £20K of shares from the SAYE provider into the Flexible ISA
• Selling the shares free of CGT
• Moving the money out
• Repeating this process as many times as necessary (within the 90 day limit)?

Couldn't this allow significant sums (potentially 6-figure+) to be withdrawn from a SAYE scheme completely GCT free?   

eskbanker

vacheron said:

If the donor ISA for the SAYE shares is a flexible S&S ISA, and the value of the SAYE shares are indeed valued at their current market value. What is to stop me from:

• Transfering £20K of shares from the SAYE provider into the Flexible ISA
• Selling the shares free of CGT
• Moving the money out
• Repeating this process as many times as necessary (within the 90 day limit)?

Couldn't this potentially allow 6 figure sums to be withdrawn from a SAYE scheme completely GCT free?   

I imagine that this would be incompatible with the spirit of the rules but I'm not sure if it breaches the letter of them - the guidance page you linked to states that:

You can transfer up to £20,000 of employee shares into a stocks and shares Individual Savings Account (ISA) if you have shares in a:

• Save As You Earn (SAYE) scheme
• Share Incentive Plan (SIP)

Your ISA provider must agree to the transfer.

but doesn't clarify if that's £20K per transaction, or per tax year, or per share scheme, etc.

vacheron

eskbanker said:

You can transfer up to £20,000 of employee shares into a stocks and shares Individual Savings Account (ISA) if you have shares in a:

• Save As You Earn (SAYE) scheme
• Share Incentive Plan (SIP)

Your ISA provider must agree to the transfer.

but doesn't clarify if that's £20K per transaction, or per tax year, or per share scheme, etc.

Yes, I've noticed that sometimes the gov.uk site directly references the allowance that would apply for the "average person" to make it simpler for the reader, rather than go into the detail.

I have also seen them do that with personal allowance too where they just quote the current basic personal allowance, whereas in reality the individuals specific PA is what should apply. (But then the reader would have to go off and find out what that was first, which they probably won't want to do).

Hopefully this is the case here!


EDIT: I've done a bit of googling with specific keywords "SAYE, 90 day, ISA" and found this on the Tesco SAYE hub.  My SAYE is not Tesco, but it seems to suggest that this is indeed possible, or even possibly condoned (by Tesco at least)! 

"Invest up to £20,000 per year, take advantage of tax-free investing, and access your money at any time. You can buy your shares and move up to £20,000 into your FISA. Then you can sell these shares creating headroom for you to add a further £20,000 from your scheme. You can repeat this process as many times as you need and, if it is done within 90 days, no CGT is liable."

I guess it might all depend if my SAYE provider will release shares in 20K chunks? 

JamTomorrow

vacheron said:

EDIT: I've done a bit of googling with specific keywords "SAYE, 90 day, ISA" and found this on the Tesco SAYE hub.  My SAYE is not Tesco, but it seems to suggest that this is indeed possible, or even possibly condoned (by Tesco at least)! 

"Invest up to £20,000 per year, take advantage of tax-free investing, and access your money at any time. You can buy your shares and move up to £20,000 into your FISA. Then you can sell these shares creating headroom for you to add a further £20,000 from your scheme. You can repeat this process as many times as you need and, if it is done within 90 days, no CGT is liable."

I guess it might all depend if my SAYE provider will release shares in 20K chunks? 

Did you end up doing this Vacheron as I've got a SAYE maturing well above £20k and would like to use this option to recycle £20k a couple of times through the SAYE to ISA transfer route.  Thanks.

vacheron

JamTomorrow said:

vacheron said:

EDIT: I've done a bit of googling with specific keywords "SAYE, 90 day, ISA" and found this on the Tesco SAYE hub.  My SAYE is not Tesco, but it seems to suggest that this is indeed possible, or even possibly condoned (by Tesco at least)! 

"Invest up to £20,000 per year, take advantage of tax-free investing, and access your money at any time. You can buy your shares and move up to £20,000 into your FISA. Then you can sell these shares creating headroom for you to add a further £20,000 from your scheme. You can repeat this process as many times as you need and, if it is done within 90 days, no CGT is liable."

I guess it might all depend if my SAYE provider will release shares in 20K chunks? 

Did you end up doing this Vacheron as I've got a SAYE maturing well above £20k and would like to use this option to recycle £20k a couple of times through the SAYE to ISA transfer route.  Thanks.

Hi JamTomorrow. 

I haven't done this yet as my curent SAYE doesn't mature for a couple of years (I'm fully subscribed to our 5 year option).

I was considering my options due to the recent obliteration of the CGT allowance over the last couple of years, and now the very real risk that the october budget could increase the CGT rates outside of the annual CGT allowance into which, like yourself, a large amount of my potential gains will now fall.

There is also the possibility that Labour could further reduce the now paltry £3K CGT allowance, or potentially even remove it altogether!


From my research there appears to be 3 pre-requisites required to make this work:

1. That you have a Flexible S&S ISA ready and waiting to recieve the funds with some space remaining (ideallly as much as possible to limit the required number of separate transfers). 
2. That your SAYE scheme administrator is willing to move the shares out in multiple <£20K chunks, each a day or two apart.
3. If you wish to retain more than your remaining ISA allowance as shares, that you are happy to liquidate the shares in the ISA as and then buying them back in some kind of GIA (having crystalised the capital gain to date within the ISA). Though obviously the last tranche of up to £20K can stay in the ISA if desired. 

What would be even better would be if the 90 days from the SAYE maturity spanned the tax year as you could then leave £40K in the ISA by transferring some before and some after the 5th of April without needing to "bed and ISA" the second £20K in the new tax year which will elminiate any spread risk, market movement, and trading charges / stamp duty on the rebuy.   

JamTomorrow

Further to this, there is also an article on Equiniti which recommends as an option transferring into a Flexible ISA and then selling and transferring in more - 

SAYE, CGT And EQi’s Flexible ISA - Equiniti

I think I will be setting up a Flexible ISA with Equiniti.

It does appear to be a loophole that benefits the wealthy and enable a legal route to crystalise significant capital gains well above the £3k limit from a SAYE scheme without paying any CGT.  I would be surprised if this doesn't get closed down in future budgets.

vacheron

Good article, and it does indeed seem to corroborate the logic and what other SAYE providers have suggested. 

I wouldn't go so far as to say that it benefits the "wealthy". Due to the recent ridiculous cuts in the CGT allowance, the receptionist at our company who put aside just £100 per month for 3 years and amassed £3,600 in shares would now be liable to CGT when she sold them if they went up by more than just 45% in those 3 years (assuming the company applies the full permissible 20% discount (which our company always does). 

I sincerely hope they leave this alone as this was the last bastion of hope against any CGT and pension meddling which October may bring. 

xcell

Did anyone successfully do this this year? Exercise a SAYE and pay more than 20K through a flexible ISA in chunks?  

jimjames

vacheron said:

I wouldn't go so far as to say that it benefits the "wealthy". Due to the recent ridiculous cuts in the CGT allowance, the receptionist at our company who put aside just £100 per month for 3 years and amassed £3,600 in shares would now be liable to CGT when she sold them if they went up by more than just 45% in those 3 years (assuming the company applies the full permissible 20% discount (which our company always does). 

Although she wouldn't pay any CGT by moving them into an ISA as it would still be well within the £20k ISA limit. I'd suggest as such it is the wealthy that would benefit from multiples of £20k being put through an ISA each year as I suspect the average person on the street would think that you'd be rich with that sort of amount.