Investing abroad : Taxation

[Matthen]

Hello,

My employer has offered me the opportunity to purchase shares in the company. The company is a private corporation, registered in the United States. The investment will be modest, as the fund will be inaccessible until the corporation is floated.

I believe I understand the process of actually buying the shares, but I have little-to-no knowledge of the tax situation. As I understand it, no stamp duty is payable because a) the shares are newly issued and b) the company is based in the United States, not GB.

Any dividend will accrue, and be paid out upon sale of the shares - the dividends will almost certainly be below my annual allowance, so again, I don't believe that tax would be payable.

I believe I will be taxed on the gains of the original investment, after the investment has paid out - this is fine.

I know nothing about the US tax system - Does anyone know: will I be liable to pay anything upon investment? Will I be taxed by the US Govt at all, or would I only be liable here in the UK? Is my understanding above correct, or have I missed something important? Any advice is greatly appreciated.

[Mattt]

W8BEN is the form you need IIRC

[Eric Mc]

As a UK tax resident, you are liabile to UK tax on your WORLDWIDE income.

However, various reliefs are available.

Firstly, the annual £2,000 dividend tax free allowance applies to all dividends from all sources, including foreign dividends.

Secondly, if the US company pays you a dividend, there will most likely be a US witholding tax amount deducted from the dividend.

When entering the dividend amount on the tax return, show the Gross Dividend amount BEFORE the foreign tax was deducted. Also show the tax amount.

To return foreign income to HMRC, you need to complete a Self Assessment tax return and you need to complete the Foreign Income Supplementary Pages (SA106).

[cavey76]

Mattt said:

W8BEN is the form you need IIRC

This!

I worked for a US company pre float and one of the investment banks (GS or Morgan or someone) who provided the actual service of us buying shares as employees, RSUs and so own would provide you the template (online latterly) that you could fill in and deposit. Has to be done for every instance you have so if you had a seperate SIPP or ISA with US shares you would have to do the same.

Pretty painless and from a tax point of view i believe there is some sort of reciprocal treaty in place

I am now part of a much bigger US company who offers me the ability to buy their stock on a monthly basis and again (Morgan Stanley) the bank hold, and remind me when i need to redo my W8BEN

[supersport]

When this happened to us the were various schemes, I forget the name, dependent on the valuation of the business that meant that only CGT was paid at 10% and not income tax.

This made a huge difference to those lucky enough to be in early.

[ellroy]

The tax due, CGT or income, is to do with the type of share option rather than the value.

[supersport]

ellroy said:

The tax due, CGT or income, is to do with the type of share option rather than the value.

The EMI scheme, only available to companies with assets less that £30 million.

https://www.gov.uk/tax-employee-share-schemes/ente...

[Mattt]

If it’s an overseas scheme, I doubt it’s been structured in a UK tax efficient way - would like to be proved wrong though as I have similar.

[supersport]

Ours is a US company although started in Blighty. We are listed on the NYSE. All pre IPO options were in dollars.

I don’t have all the details is we had outgrown the scheme the year before I joined, so I didn’t get to enjoy that one. But those guys have done very well out of it.

[Matthen]

Thanks all for the information!