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Sam
Sam, Accountant
Category: Tax
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I live and work in the UK. My company gave me shares and the

Resolved Question:

I live and work in the UK. My company gave me shares and the income tax was with-held at that point. I left the shares in the brokerage account though they were not restricted. The shares have made a gain - do I need to just pay capital gains tax on this gain or do I need to pay income tax on this gain
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi
Thanks for your question,
If this is an approved employer share scheme, then any pay out will be made through your salary and subjected to income tax and National Insurance,
Your employer will be able to verify if this is the case.
If, however, this is not an approved employer share scheme, then the amount paid out as the gain (which I imagine will be the whole amount) will be subject to Capital gains tax, and the same would apply if you have purchased the shares through a Save as you Earn scheme.
But with capital gains the first £11,000 is exempt, and capital gains only arise after this gain threshold is exceeded.
Thanks
Sam
Customer: replied 2 years ago.

Hi

So we may be talking at cross purposes. When the shares were given to me by my employer, and deposited into a brokerage account, income tax and NI were paid at that point.

But from that point to the point at which I actually sold the shares, the share price went up and I had a gain.

Now interpretation # ***** of that is that given it is shares, then the only tax to be paid on the gain is capital gains tax - which would be 28%.

However interpretation # ***** is that these shares were given to me as a form of income, and the gain would also be classified therefore as income, so I should pay income tax on the gain as well now, and that would be at 45%

I would be most interested in your view of whether the tax due on the gain is according to interpretation # ***** #2?

Many thanks

Expert:  Sam replied 2 years ago.
Hi
Thanks for your response
Its the gain to which I refer - and it all depends on what kind of scheme the share purchase has been made under, which only your employer can advise you of.
I advised that if this was an approved scheme the gain would be subject to income tax as would be paid through your salary.
As you suffered the tax at the time that the shares were awarded then its very likely that they have been treated as earnings under Income Tax (Earnings and Pensions) Act 2003 (ITEPA) sections 226A to 226D as an unapproved scheme, so this means the disposal will be subject to PAYE
See link here http://www.hmrc.gov.uk/employeeshareholder/guidance-it-ess.pdf
Thanks
Sam
Customer: replied 2 years ago.

Thanks Sam,

So to be sure I understand. Lets say the shares vested, and suffered income tax at that point, and were worth £50K after income tax. The value then rose to £80K, so a gain of £30K that has not suffered any tax yet.

If its an approved scheme, then I need to still pay income tax, likely at 45% or so, on the £30K gain.

If its not an approved scheme, then I will only have to pay CGT on the £30K gain, likely at 28% or so.

(I have simplified and taken away the issue of the CGT allowance of £11k)

Many thanks

Expert:  Sam replied 2 years ago.
Hi
Yes that's right, and your employer can advise which type of scheme it is (as there are so many) and verify the tax position (whether income tax, which I think is likely) or capital gains tax.
Thanks
Sam
Customer: replied 2 years ago.

Thanks for your help!

Expert:  Sam replied 2 years ago.
Hi
You are very welcome
Let me know if you require any further assistance once you have spoken with your employer.
If, in the meantime I could trouble you to rate the level of service I have provided, it would be appreciated, as this ensures I am credited for my time.
Thanks
Sam
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