Excercising \ Selling shares in an Approved Scheme - CGT
Discussion
Well I was told by an tax accountant so I'm pretty sure! I had/have both approved and unapproved options so I think I now know the details to plan properly.
It's not as bad as it sounds though because there is business taper relief which is much more generous than normal taper relief, assuming you stayed with the company.
There are also opportunities to reduce the taxable gain by nominating which shares you have sold, if you also have other shares bought more recently through the same scheme. ie. you can elect that the shares you sold were not the ones that you exercised, but others in the same company (that you bought at a higher price) if you still have some.
This might help: www.hmrc.gov.uk/pdfs/2001_02/capital_gains/ir284.pdf
It's not as bad as it sounds though because there is business taper relief which is much more generous than normal taper relief, assuming you stayed with the company.
There are also opportunities to reduce the taxable gain by nominating which shares you have sold, if you also have other shares bought more recently through the same scheme. ie. you can elect that the shares you sold were not the ones that you exercised, but others in the same company (that you bought at a higher price) if you still have some.
This might help: www.hmrc.gov.uk/pdfs/2001_02/capital_gains/ir284.pdf
Leo - you need a new accountant !!! Or your shares weren't in an approved scheme, or weren't held for 3 years. Extract from HM Revenue and Customs website:
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Share Incentive Plans give you a special CGT advantage: if you keep your shares in the plan until you sell them, you will not have to pay CGT on any gains you make, however large.
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Share Incentive Plans give you a special CGT advantage: if you keep your shares in the plan until you sell them, you will not have to pay CGT on any gains you make, however large.
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Most people who acquire shares through employer schemes have no choice in the type of scheme through which the shares or share options have been acquired. The schemes are set up by the business owners/employers.
Whether the disposal of such shares generates a Capital Gains Tax liability depends on the nature of the scheme and CGT rules. These rules, especially in relation to share schemes, change very frequently. Gordon Brown in paricular has been keeping a keen eye on "employee share schemes" in recent years and has made them a lot less attractive than they used to be.
Whether the disposal of such shares generates a Capital Gains Tax liability depends on the nature of the scheme and CGT rules. These rules, especially in relation to share schemes, change very frequently. Gordon Brown in paricular has been keeping a keen eye on "employee share schemes" in recent years and has made them a lot less attractive than they used to be.
AFAIK...
If it was an employee share option scheme, then whether it was approved or unapproved, if the option is exercised, and the shares sold, there is CGT due. This may be lessened by taper relief.
The only difference between approved and unapproved is that you can exercise an approved option without any CGT, which only arises on sale; an unapproved option can generate a CGT liability on exercise.
There are a bunch of other more specialised schemes (EMI) which have different tax breaks, but are unlikely to be applicable to bigger companies.
See a (decent) tax accountant - and hand him your profit
.
If it was an employee share option scheme, then whether it was approved or unapproved, if the option is exercised, and the shares sold, there is CGT due. This may be lessened by taper relief.
The only difference between approved and unapproved is that you can exercise an approved option without any CGT, which only arises on sale; an unapproved option can generate a CGT liability on exercise.
There are a bunch of other more specialised schemes (EMI) which have different tax breaks, but are unlikely to be applicable to bigger companies.
See a (decent) tax accountant - and hand him your profit
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