Selling employee shares - tax implications

[johnnyBv8]

Would really appreciate some advice on a tax matter....

I have a stock plan account via my employer. I've received various share/stock awards, usually on phased/long-term incentive vesting basis, since about 2012, with vesting from 2013 onwards. I'm UK based but my employer is a NYSE company and the shares are in USD. Each time the wards are vested I get a letter which confirms "to cover the tax obligation, your employer withheld a portion of the award vesting at fair market value to pay the tax withholding on receipt".

Due to company performance and exchange rate, the share value has increased quite markedly, and I'm considering selling some of the shares. Is it just CGT that I need to be wary of at c.£11k pa?

Thanks in advance.

[LeoSayer]

In my experience, CGT only applies on any increases in value after vesting.

In other words, the book cost of the shares (for CGT calc purposes) is the value at the point they vested.

[The Leaper]

OP,

I assume:

1. you are a registered Non- Resident Alien for USA IRS tax purposes,
2. you have completed a form W-8BEN and lodged this with the share plan administrators,
3. the dividends that you are receiving here in the UK on the vested shares that you own are subject to USA withholding tax, so those dividend are paid net of that tax
4. once those net dividends arrive here in the UK you account to UK HMRC for the tax due on the dividends, less the already deducted USA withholding tax, after taking into account the UK dividend tax allowance, currently £2000.

If you decide to sell some of the shares, the gain will be liable to UK CGT. You will need to work this out yourself and there's good guidance on HMRC's website. The essentials are

a. you are liable for any CGT on a gross gain, less expenses, in excess of the CGT allowance, currently set at £12,00 for this tax year
b. you do not need to report anything, including your calculations, if the gross proceeds of the sale do not exceed 4 times the current allowance ie a reporting figure of £48,000.

So, there's two things to watch out for.

Assuming that you do sell some of the shares, and retain some more that you could sell in future years, you will need to set up a " s.142 holding" to track the expenses, if any, of acquiring the shares at different times. You use this s.142 holding, ie the expenses records, to work out the average expense per share and so the total expenses for the shares being sold, and this is deducted from the gross gain on the sale of the shares when calculating CGT liability, if any, for the relevant tax year. Again, there's good information on HMRC's website.

If you know all this stuff already, sorry to preach you your tasks!!

R.

[johnnyBv8]

Lealer - thanks so much for the detailed response....really helpful. Your assumptions are all correct, so I'll look into the s.142 holding you mention.

[bmwmike]

Similar scenario here but mine get vested then paid to me via payroll so there is no CGT. I think...!