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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I worked for a US-based company in Australia since 2012 and

Customer Question

I worked for a US-based company in Australia since 2012 and was awarded with 100 Unvested Shares - vesting at 12.5% every 6 months.
I've since transferred to the UK with the same company. Another portion of these shares have now vested.
Do I have to pay tax in the UK now for these vested shares even though they were awarded in Australia? Or can I pay tax for them in Australia? (this would be financially more beneficial).
I am planning on selling these in the next few weeks and proceeds from the sale would be transferred directly to an Australian bank account (if that makes a difference).
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me what your employer's tax people told you. Were the shares simply given to you or were there a any conditions? Are you a UK national?
Customer: replied 2 years ago.

Hi.

The shares were Restricted Stock Units granted as part of a renumeration package. They 12.5% vest every 6 months.

I'm an Australian national now working in the UK.

This is copied from my company's internal website:

"Information for expatriates and mobile employees

If you’re a citizen or resident of another country, have transferred employment from one country to another, are or have been on assignment to a country other than your country of residence, or are considered a resident of another country for local law purposes, the information contained in this guide may not apply to you.

The tax treatment of your stock awards may depend upon where you were living on the date the stock award was granted, where you were living on the date it vested, and/or where you are when you exercise it. You should seek professional advice to ensure that you fully understand the interaction of the applicable tax laws, the impact of any tax treaties, and your personal liabilities and obligations."

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 2 years ago.

Sorry not sure if you got my last message...

Here is some additional information below... although it may be irrelevant because it's referring to RSU shares granted to a UK employee within the UK:


"RSU vesting


You are subject to income tax and national insurance contributions (“NICs”) when your RSUs vest and the underlying shares are issued to you. The taxable amount is the fair market value of the shares issued to you at vesting.

Your employer is required to calculate income tax and NICs and pay these amounts to HM Revenue & Customs (“HMRC”) when your RSUs vest. Your employer will withhold any applicable income tax and NICs under the Pay As You Earn system or by any other means set forth in your award agreement.

Your employer is also required to report the details of the grant and vesting of the RSUs, the acquisition of the shares and the tax withheld to HMRC.

You are responsible for including any income realized from RSUs in your annual tax return, and for paying any difference between the amount withheld and your actual tax liability.


Dividends


If a dividend is declared on common stock after you acquire shares under the Plans, you are subject to tax in the United Kingdom on any dividends you receive. In addition, you are subject to US federal income tax withheld at source. You may be able to claim a reduced rate of US federal income tax withholding on such dividends as a resident of a country with which the United States has an income tax treaty. You must have a properly completed US Internal Revenue Service Form W-8BEN on file in order to claim the treaty benefit. You also may be entitled to a tax credit in the United Kingdom for the US federal income tax withheld.

You are responsible for reporting and paying taxes on any dividends paid on shares you hold. To determine your tax obligations for dividends, consult a professional tax advisor.


Dividend equivalents


If a dividend is declared on common stock and you hold unvested RSUs on the record date, you are eligible for dividend equivalents. You are subject to income tax and NICs on any dividend equivalents paid to you when the RSUs vest. Any accumulated dividend equivalents are used to help offset taxes you owe on the RSUs. This enables the company to release more vested shares to you than it otherwise would.

Your employer will withhold any applicable income tax and NICs under the Pay As You Earn system when the RSUs vest and the dividend equivalents are paid to you. You are responsible for paying any difference between your actual tax liability and the amount withheld from the dividend equivalent payments.


Selling company shares


You are responsible for reporting and paying any capital gains tax resulting from the sale of shares acquired from RSUs.

You are subject to capital gains tax on any gain you realize when you sell your shares if the gain exceeds your annual personal exemption amount (currently £11,000). The taxable amount is the difference between the fair market value of the shares at vesting and the sales proceeds.

If you acquire other shares, you will need to take into account the share identification rules in calculating your capital gains tax liability."

Expert:  TonyTax replied 2 years ago.
Thanks. How long have you been living and working in the UK?
Customer: replied 2 years ago.

We commenced living and working in the UK since May 2014.

The first occasion these shared vested 12.5% was in April 2014. Of course, I declared these vested (and sold) shares as capital gains on my Australian tax return for the 2013/14 Financial year in July 2014.

Expert:  TonyTax replied 2 years ago.
Thanks.

I'm just checking a few things then I'll post my answer.
Expert:  TonyTax replied 2 years ago.

Hi again.

There have been changes to the rules governing the taxing or otherwise in the UK of employment related securities awarded to employees who were not UK resident when share awards were made to them and where those shares did not actually become the property of the employee (vest) until after their arrival in the UK. The legislative changes are set out in Schedule 9 Part 1 of the Finance Act 2014 here and will take effect from 6 April 2015.

So long as the award of the restricted stock units was not linked to a move to work in the UK, you should not pay UK tax and national insurance contributions on any shares that vest no later than 5 April 2015.

After 5 April 2015, the increase in the value of the shares between the date of the award and the vesting date will be subject to UK income tax and NIC. The amount of the gain that will be taxed in the UK may be reduced based on the time from award to vesting that you were living and working abroad.

As a non-UK domiciled individual, you can choose to be taxed on the remittance basis if you wish whereby you only pay UK tax on UK source income and gains and foreign source income and gains that you remit to the UK. Read about the remittance basis of assessment in part 9 of RDR1 here. You should also read section 8 on the potential loss of UK personal allowances if you use the remittance basis of assessment.

Take a look here and here for more information on the changes that will affect you. If the second link does not work, click here and select the first search result. In particular, click on the example "Peter's Share Options".

Finally, you would need to consult an expert on Australian tax for advise on whether you would still have to pay tax there on shares that vest while you in the UK. The tax treaty between the UK and Australia would serve to give you relief from double taxation.

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

Expert:  TonyTax replied 2 years ago.
Hi again.

It's been a few days since I answered your question. Is there anything you need further clarification on?

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