Selling shares in SIP

hazcrew

My wife has shares in an SIP purchased prior to 2010 these are listed on the US stock market and she pays tax on the dividends in the USA therefore no uk tax is due on them and now wants to sell them.

The original documentation stated there was no tax due on the shares if she kept them for 3 years after purchase.

However, in 2023 the UK management company transferred the shares to a nominee account as the SIP scheme closed (without our knowledge).

I suspect capital gains tax will need to be paid.
Does anybody know if that would based on the original pre-2010 purchase price or transfer price in 2023 when it came out of the SIP?

The reason is critical is the shares increased 4 fold prior to 2023 and very little since so she wants to minimise the tax hit.

masonic

See https://www.gov.uk/government/publications/share-incentive-plans-and-your-entitlement-to-benefits-ir177/share-incentive-plans-a-guide-for-employees#capital-gains-tax

If they were held within the plan between 2010-2023, then there should be no tax payable on gains while they were held in the plan. She should use the valuation when they were removed from the scheme as her base cost when she comes to sell them.

Dead_keen

As a starter, this may not correct:

she pays tax on the dividends in the USA therefore no uk tax is due on them

There may well be UK tax on it, with the US tax withheld reducing the amount of UK tax that needs to be paid. In practice, if your wife is a non-taxpayer on a basic rate taxpayer, the US tax credit will cover the UK tax. But not if, for example, she is a higher rate taxpayer.

Another exception would be if the dividends were reinvested into dividends within the SIP. But that would have stopped in 2023 based on what you have said (assuming she is still an employee in 2023 and depending on why she left).

However, in 2023 the UK management company transferred the shares to a nominee account as the SIP scheme closed

If this happened in 2023 (and your wife was still an employee of the original group) then the base cost of the shares will be market value of the shares on the date that they were transferred out of the SIP. If she ceased to be an employee before this, the shares would have a CGT base cost equal to the market value when the shares were transferred out of the SIP. This would not be on the leaving date but shortly after (to allow the SIP administrator to do their administering).

DRS1

Presumably the dividends were paid as cash and not reinvested in shares.

hazcrew

Thank you for your replies.
The dividends were paid as cash, not re-invested hence tax paid in the USA - so no uk tax as she is a standard UK taxpayer (retired).

She technically left the company as the site she worked on was sold to a new company so her contract (including length of service etc ) was passed to the new company prior to 2010.

I believe the shares were held in the SIP scheme until 2023 when it was closed.

@Dead_keen I'm hoping the 2023 value is used for capital gains tax as this would be minimal

Part of the problem is the company changed who managed the shares several times before 2023 and the only documentation we got was quarterly generic dividend slips

masonic

https://forums.moneysavingexpert.com/discussion/comment/82151587#Comment_82151587

You need to establish exactly when the shares were removed from the SIP. It would be normal to be given a valuation on that date and some termination paperwork.

Dead_keen

I believe the shares were held in the SIP scheme until 2023 when it was closed.

@Dead_keen I'm hoping the 2023 value is used for capital gains tax as this would be minimal

Part of the problem is the company changed who managed the shares several times before 2023 and the only documentation we got was quarterly generic dividend slips

From what you say, I'm not confident that they were in the SIP until 2023 based on what you have written. Obviously I have no idea of the full facts and so it is just my spidey senses.

If a company does wish to terminate a tax advantaged SIP then there is a procedure that must be followed, including the issue of a plan termination notice. A copy of that notice must then be given to each individual with shares still in the SIP trust. The trustee must then remove the shares from the SIP by the later of (i) the end of the three months notices period, and (ii) the date on which the shares can first be sold without giving rise to an income tax charge (unless the employee agrees). So there is a proper process. set out in the SIP rules and trust deed based on the legislation, for closing the SIP that means employees must be told.

So why do my spidey senses tingle?

1. You say "the SIP scheme closed (without our knowledge)" - that breaches the legislation. It also suggests poor admin by someone being paid purely because they are competent to do the admin.
2. You say "SIP purchased prior to 2010" - that suggests she may not be an employee because (i) it is a long time ago, and (ii) if she was still an employee why would she not have been saving after 2010 and getting the tax relief
3. You say "2023 the UK management company transferred the shares" - the use of "management company" makes me wonder whether that is the SIP trustee, the administrator of the SIP (both fine) or someone else (not fine)
4. You say "(retired)" - again that suggests she may not be an employee, which means that the shares would have left the SIP trust when, or shortly after, she left employment
5. You say "the company changed who managed the shares several times before 2023", it would be very unlikely that the SIP trustee would have changed. But the SIP administrator may well change but the handover process would mean all the records would transfer and so I am suprised that a change of administrator causes problems.
6. It's quite possible that the company whose shares were used in 2010 may have been taken over and that led to the change of management company. A change of control might mean that the replacement shares stop qualifying for SIP shares.

I may be completely wrong. I have no idea. But if they start to tingle then they start to tingle.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82151587#Comment_82151587

She technically left the company as the site she worked on was sold to a new company so her contract (including length of service etc ) was passed to the new company prior to 2010.

That sounds like a TUPE transfer which would usually be a good leaver under SIP rules.

You would expect there to have been some communication at the time saying what happens with regard to the SIP shares and whether there is a tax charge (which may be different according to what type of SIP shares they are and how long they had been held). You would also expect that the shares would have come out of the SIP shortly after the TUPE transfer.

The key thing will be to try to pin down precisely when the shares left the SIP - did it have any sort of website she could try to log into?