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TonyTax
TonyTax, Tax Consultant
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Hi. My husband sold his shares in a limited company 2 years

Customer Question

Hi. My husband sold his shares in a limited company 2 years ago?
He had 4.1 percent share in the company.
He was told if he wanted to sell it had to be the full amount.
At the time he felt very unsafe in his job and reluctantly sold.
He was offered 250k for them of which he has paid well over 100k tax.
Is this correct?
He personally feels he was under stress to sell and the shares have been given to another member of staff.
The scheme the company offered was an Emi
Many thanks
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

EMI stands for Enterprise Management Incentive. It is a share option scheme. Did your husband acquire his shares through such a scheme by exercising an option to buy the shares at a price set when the option was granted? If so, was the price he had to pay for the shares less than the value of the shares at the time the option was granted? Did he exercise the option at the time the shares were sold? Who bought the shares or was your husband bought out of the option before he could exercise it?
Customer: replied 3 years ago.
Hi. He was given the shares and did not have to pay for them.
He has advised me he was given 4.9 percent
Can he claim any of the tax back that he paid on them ?
Expert:  TonyTax replied 3 years ago.
Thanks.

How long before he sold the shares was he given them?
Expert:  TonyTax replied 3 years ago.

The reason I asked how long it was before your husband sold the shares he was given is that if an employer gives an employee free shares and it is not part of an HMRC sanctioned scheme, the value of the shares at the time they were given to the employee is taxable as if it were salary.

Your husband appears to have paid tax at 40% but if his income was over £150,000 for the tax year, he would have paid tax at 50% on the excess over £150,000. Under an EMI scheme, if no payment is required on exercise of the option, the recipient of the shares pays income tax based on the value of the shares at the time the option was granted or the value of the shares at the time the option is exercised if that is lower.

There are some notes on the EMI scheme which explain the tax implications here. Normally, something is paid for the shares and if that is the same as the value of the shares when the option is granted, then there would be no tax to pay when the option was exercised.

Without access to the full detail of what went on, it's difficult to be definitive about the tax situation but, based on what you have told me, I don't see why your husband would be due a tax repayment. He could ask the tax office for a tax calculation for the tax year for which he paid the £100,000 in tax on the £250,000 he received for his shares. That will show all his income and whether he was overpaid or underpaid for the year. He should also ask his employer what the £250,000 was taxed as it was. I'd be happy to comment further if more information was available.

I hope this helps but let me know if you have any further questions.

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