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bigduckontax
bigduckontax, Accountant
Category: Tax
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I need some advice on an EMI scheme with complications.

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Hi, I need some advice on an EMI scheme with complications. The company I had EMI options in sold last year but on a complicated initial amount up front and additional payments over the following 3 business years depending on performance to plan. I qualify for the 10% tax rate on the sale of the shares. However, will all the future payments I get in the following 3 years, which were part of the original sale, qualify for 10% tax. Or will I need to pay normal CGT on those. Also, if paying normal CGT on those, do I get to use the CGT allowance of £11k against each of the future payments?
Thanks
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. The normal treatment for such options is that they are sold on the vesting day so no CGT arises anyway, there being no gain to tax, You are only entitled to Entrepreneurs' Allowance if you are finally going out of that business so beware; you may well not be entitled to the 10% flat rate, You do have a non cumulative Annual Exempt Amount (AEA), 11.1K not 11K, to offset any gains. There will be a CGT charge when the employee disposes of shares and proceeds exceed the market value at the date of the grant of the option. I do hope that you have found my reply of assistance.
Customer: replied 1 year ago.
Sorry, I meant the company sold last year, so the EMI shares have vested, but the company sold for £x upfront and then three annual payments over the next 3 years depending on how the company performs against plan, i.e we don't know how much extra will be released from the original sale, but we do know the maximum the total sale of the shares will come to.
Expert:  bigduckontax replied 1 year ago.
Right, then the 10% rate appears appropriate. Here is an explanation from chiene.co.uk 'Where disposals are made with payments by installments CGT is usually levied on the full amount as at the first payment date irrespective of some of the proceeds being with held. However, it is possible for the tax to be deferred until the actual payment dates providing: The conditions for the payment of tax in installments are:- • part or all of the sale consideration is payable in installments beginning with the sale date, and • the installments are payable over a period of not less than 18 months. A claim may be made for the tax to be paid in installments. The tax installments are:- • decided by the Inland Revenue [now HMRC], but • over a period of not more than eight years from the normal due date and not extending beyond the last of the sale installments.' These transactions would appear to comply with these limitations.
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Expert:  bigduckontax replied 1 year ago.
Thank you for your reply.
Expert:  bigduckontax replied 1 year ago.
Sorry, that should have read 'Thank you for your support,' I must be getting old!

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