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Sam
Sam, Accountant
Category: Tax
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I no longer work company but I received a share certificate

Resolved Question:

I no longer work for the company but I received a share certificate from them (part of my redundancy package )for the value of £1290.27 in July 2013. I paid the company £426.30 in tax to cover the tax. Do I have to put this on my self assessment tax return, as I did not receive any monetary income? If so how do account of the tax I have paid on the form? Thanks Emma
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi Emma
Thanks for your question
Until such time you sell the shares there is neither income nor tax suffered to declare, as part of the share position, as this only occurs when you dispose of the shares.
The tax you have paid up front was connected to your lump sum redundancy which, yes you do declare on your tax return under employment lump sum along with the rest of the lump sum payment, less any element that is tax free as statutory non contractual redundancy and any other tax suffered- from the taxable element of any payment.
The online return asks during the process of tailoring your return whether you had any lump sum payments from employment and this is where this will go.
Thanks
Sam
Customer: replied 2 years ago.

The tax I paid has nothing to do with y redundancy. I was made redundant in 2010 and paid tax on that then. These were PSP shares which I had at the point of redundancy and negotiated that I could keep. In July 2013 I received a share certificate and had to pay the company £426.30 in tax, which I did.

From your answer I'm still not clear whether I have to put this on my tax return.

Thanks every so much for any further clarification you can give me?

Emma

Expert:  Sam replied 2 years ago.
Hi
Thanks for your response
The way you present the situation, it seems to have everything to do with the redundancy as you state that you were issued the share certificate as part of your redundancy payment - so your employer had to tax this as it was a taxable benefit given to you as part of the redundancy package. Is this not the case?
If in fact you are now stating that you sold the shares and received a lump sum from which tax was deducted amounting to £426.30, then I agree it has nothing to do with the redundancy and would be an amount that should have been paid and tax charged through PAYE (last payroll salary payment) Is this the case?
If neither of the above situations apply then please advise/ clarify
You had shares awarded to you throughout your employment and as part of your redundancy you wished to keep these.
Did you sell the shares to the company, at todays value - from which you were paid a lump sum, and then charged tax on.
Did you receive noting for the shares but just a share certificate, and a £426.30 out of pocket
Were the shares listed within your redundancy package paperwork, and what else was listed as part of your redundancy
Or did you physically part with £426.30 after you cease employment to cover the shares
Please provide a more detailed position - so I can advise further
Thanks
Sam
Customer: replied 2 years ago.

Hi there,

The shares were awarded to me in my final year of employment but they were part of a 3 year plan, so I was not able to acquire them until 2013, 3 years after I had left. I negotiated keeping them.

I received a share certificate, no money. And I had to pay £426.30 physically into a nominated bank account. I understood this to be the tax liable on the value of the share certificate at the time at which it was sent to me. It is my understanding that as and when I exercise the share certificate, I will not be liable for tax on that value....only on any incremental value of the shares above and beyond the £1290.27 they were worth at the point at which they were transferred to me.

Does that help?

Thanks,

Emma

Expert:  Sam replied 2 years ago.
Hi Emma
Thanks for your response
Yes all of that is correct - however the value of said shares at that time (1290.2&) on which you suffered the tax, was this listed as part of your redundancy package?
Or a completely separate negotiation away from the redundancy agreement and paid out redundancy settlement
AS depending on how this came about and how it was documented, determined where on the tax return it is listed.
Thanks
Sam
Customer: replied 2 years ago.

OK. Thanks for explaining.

My redundancy document states under point 3 - Payment of salary, benefits and expenses - that "it has been agreed that 40 Performance Share Plan shares will remain exercisable on 30th June 2013".

Thanks,

Emma

Expert:  Sam replied 2 years ago.
Hi Emma
Thanks for your response
And when it looks at what has been paid out to you, (which will be broken down under categories such as statutory redundancy under £30,000 , statutory redundancy in excess of £30,000 pay in lieu, annual leave etc etc ) is this £1290.27 listed as part of the value of the redundancy package and the tax of £426.30 listed as part of the tax suffered
As it should be - as it was agreed as part of your redundancy package pay out, but whether it was or not is another matter - and its this I am trying to establish so you place the value of the shares and the tax together
Also the rate at which you suffered tax is high if the lump sum value of shares is £1290 then you should only have paid £258 tax - but you paid a strange amount (not 40% either which would have been £516)
This is why I am trying to establish how this was dealt with - as you should have received relevant documentation (either through the redundancy payout paperwork or on its own) detailing the payment (or in the case of the shares - the value) and the tax suffered and it may be you need to go back to the employer for this, as its essential that this is declared to HMRC
Thanks
Sam
Customer: replied 2 years ago.

Hi there,

I received an email from the Company Secretary which states the following:

Number of shares to vest 79.6% vesting - 32 shares

Total tax 33.04%

Share price £40.52

Value of award (at current share price in certificate form) £1290.27

Tax to be paid by individual £426.30

I then paid this into a Barclays Bank account.

Hope that is OK?

Expert:  Sam replied 2 years ago.
Hi Emma
Thanks for this, whilst this is a very complex way of undertaking matters - the fact is you have indeed suffered £426.30 but in the plus side actually own those shares outright as a result.
So onto how to show you this within your self assessment tax return - you in essence were awarded the £1290.20 (though it was then used to repurchase the same stock) and suffered £426.27
So you need to show this within the Employment Pay (add on £1290.20) and tax paid (add in £426.27) and add the information in the white space for additional information on the end of the employment section of the tax return.
Should you sell in the future, note any profits (between the sale price and current value) will be subject to capital gains, which sees the first £11,000 exempt - and anything over and above this amount subject to 18% or 28% capital gains tax (depending on your usual rate of tax)
Let me know if I can of any further assistance, and we got there in the end ! But if you could rate the level of service I have provided, it would be much appreciated, as this ensures that Just Answer credit me for my time.
Thanks
Sam
Customer: replied 2 years ago.

Thanks. That's great. So I have to add the company as an additional employer then? Is that correct?

Thank you for your help and I will indeed rate you well as a result of this.

Emma

Expert:  Sam replied 2 years ago.
Hi
Thanks for your response
if you already have pay and tax from that employer for that tax year, then add it to what you already have and just make a mote of the additional figures also in the additional information section.
If you do not have any other income from that company for the year, then you can either list it as income from employment (although this is not strictly so) OR ideally would then list this as additional income with the explanation of where it has come from
(if you are not sure where this additional information page/section is - let me know whether you are filing online or a paper return and I can point you in the right direction)
Thanks
Sam
Customer: replied 2 years ago.

I'm doing it online.

Thanks

Expert:  Sam replied 2 years ago.
Hi
Then you will show this within the employment lump sum (say yes to Did you receive any other UK income, for example, employment lump sums, share schemes, life insurance gains"
Thanks
Sam
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