CGT on LTIPs ?
Discussion
Can someone confirm the CGT implications of LTIP share awards … the awards are granted, have a 3 year hold and performance criteria and upon vesting full
Income tax is paid on the amount … therefore if you are awarded 150 shares in yr 0 (say value £10 (£1,500)) and the end of yr3 the vesting is assessed (assume 100%) and income tax paid on the value at vest … let’s say £15 SP so therefore income tax paid on £2,250 … the recipient then owns the remaining shares after tax … make it easy 50% tax paid so the holding is now 75 shares at £15 so £ £1,125.
If the recipient then holds for a further 2 years and the SP increases to £20 per share and they sell all 75 shares for £1,500 … subject to personal allowance is there CGT due on the gain from vest eg £15 to £20 so £5 per share on the 75 shares ? £375 taxable gain ?
I assume this is the case and therefore if multiple awards over time the seller can elect to allocate whichever shares they wish versus say a LIFO approach ?
If so, the next question for an IFA will be what can be done to gift etc over time to manage the CGT, however I wanted to confirm the basic principle first ?!
Thanks
Income tax is paid on the amount … therefore if you are awarded 150 shares in yr 0 (say value £10 (£1,500)) and the end of yr3 the vesting is assessed (assume 100%) and income tax paid on the value at vest … let’s say £15 SP so therefore income tax paid on £2,250 … the recipient then owns the remaining shares after tax … make it easy 50% tax paid so the holding is now 75 shares at £15 so £ £1,125.
If the recipient then holds for a further 2 years and the SP increases to £20 per share and they sell all 75 shares for £1,500 … subject to personal allowance is there CGT due on the gain from vest eg £15 to £20 so £5 per share on the 75 shares ? £375 taxable gain ?
I assume this is the case and therefore if multiple awards over time the seller can elect to allocate whichever shares they wish versus say a LIFO approach ?
If so, the next question for an IFA will be what can be done to gift etc over time to manage the CGT, however I wanted to confirm the basic principle first ?!
Thanks
TurboSHerts said:
if multiple awards over time the seller can elect to allocate whichever shares they wish versus say a LIFO approach
No. With some exceptions your "CGT basis" when you make partial disposals of shareholdings is your average buy-in price.https://www.gov.uk/tax-sell-shares/same-company
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