Company Stock - calculating CGT help, please
Discussion
I’m looking for some tax help from informed forum members to ensure I don’t get on the wrong side of HMRC. Please can you help?
I recently resigned from my employer after 28 years of service and have now decided to retire (now aged 61). The company is private and owned by the founding family and its employees who are awarded shares annually, the value based on personal salary at the year of award. As part of my resignation terms, I have to sell my stock back to the company within 2 years. Based on the current share value, my current holding is in excess of £250k.
I understand CGT is paid on the gains shares have made during the time they are owned. In my case, as I didn’t pay any money for the shares when they were initially allocated to me each year, am I liable for CGT on the full shareholding value of ~£250k or only the gain in value of each annual allocation? Calculating the gain will be complex because of the different share allocations and values each year but would obviously be a much lower tax burden to me than paying CGT on all the shareholding. I’d appreciate if someone can advise, preferably by pointing me to the HMRC rules that cover the above scenario.
Thanks
I recently resigned from my employer after 28 years of service and have now decided to retire (now aged 61). The company is private and owned by the founding family and its employees who are awarded shares annually, the value based on personal salary at the year of award. As part of my resignation terms, I have to sell my stock back to the company within 2 years. Based on the current share value, my current holding is in excess of £250k.
I understand CGT is paid on the gains shares have made during the time they are owned. In my case, as I didn’t pay any money for the shares when they were initially allocated to me each year, am I liable for CGT on the full shareholding value of ~£250k or only the gain in value of each annual allocation? Calculating the gain will be complex because of the different share allocations and values each year but would obviously be a much lower tax burden to me than paying CGT on all the shareholding. I’d appreciate if someone can advise, preferably by pointing me to the HMRC rules that cover the above scenario.
Thanks
If you were given them then it sounds more like they are subject to income tax.
But it probably depends on what scheme they are under as to how they are treated.
The fact that it’s private company might make a difference.
As an example when we are given stock we have to pay income tax on that days market value and then going forwards they are subject to CGT. But this for a publicly listed company.
Depending on what documents you have you probably should talk to an accountant.
But it probably depends on what scheme they are under as to how they are treated.
The fact that it’s private company might make a difference.
As an example when we are given stock we have to pay income tax on that days market value and then going forwards they are subject to CGT. But this for a publicly listed company.
Depending on what documents you have you probably should talk to an accountant.
If it's a private company how do you know the current share "value"??
With
As others have said, in the absence of an HMRC approved employee share scheme of some kind the gifted shares would be treated much like any other "non-cash remuneration" and would/should have been income taxed on their current (at that time) value in the year they were gifted. There may be a question around whether the shares were new shares issued by the company, transferred from an employee share trust or simply gifted from existing major shareholders. Subsequent gains would usually be CGT regime once the shares are fully paid and in your name.
With
- £250k in the mix (the question of valuation), and
- Tax on £250k at stake (possibly £50k or more)
As others have said, in the absence of an HMRC approved employee share scheme of some kind the gifted shares would be treated much like any other "non-cash remuneration" and would/should have been income taxed on their current (at that time) value in the year they were gifted. There may be a question around whether the shares were new shares issued by the company, transferred from an employee share trust or simply gifted from existing major shareholders. Subsequent gains would usually be CGT regime once the shares are fully paid and in your name.
Thanks for the inputs and advice I need to consider. I’ll make some enquiries about the scheme and income tax payments tomorrow to hopefully gain some clarity. It sounds like employing some advice from an accountant might be a wise move.
The company has its stock value determined by an external organisation who benchmarks performance versus a set of Wall St listed companies in similar markets, industries, technologies, etc.
Thanks
The company has its stock value determined by an external organisation who benchmarks performance versus a set of Wall St listed companies in similar markets, industries, technologies, etc.
Thanks
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