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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I work US company in their UK office. Over the past number

Resolved Question:

I work for a US company in their UK office. Over the past number of years I have been issues with multiple RSU's, many of which have vested. The company policy has always been sell to cover so I effectively have paid 50% tax on all vesting depending on the price at that time. All was taken through my payslip.
I have a couple of questions:
1) If I sell what I have at below the vesting price for each batch, I assume no tax is due?
2) If I sell at a price above the vesting price, I assume the difference is CGT?
3) Provided the gain is below my CGT allowance, I am assuming no tax is due?
4) How do I account for this type of transaction if its run through my payroll and if it isn't (I have since left the compnay and not sure how it would be transacted?
Thank you.
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.

Hi.

1 Most US employee share schemes are non-qualifying as far as HMRC in the UK is concerned. That means that the difference between what you pay for the shares, if anything, and the price when they vest is chargeable to income tax and national insurance contributions. There is no way around that, that's simply the way they are taxed. Most people don't have the cash to pay the tax when the share vest so its normal for the tax and nic to be covered by selling some of the shares. If you held on to them and paid the tax and nic from your own resources, their cost for CGT purposes would be the sum of what you paid for them and the amount on which you paid income tax and nic. If at some stage in the future you sold them for more than the CGT cost, then you may have CGT to pay.

If you sell shares at below the amount you paid for them, ie the vesting price was lower than what you paid for them, then youn will have no income tax or nic liability.

2 That's correct.

3 That's correct.

4 If the transaction is run through the payroll, then the income (the gain on the shares) will be included in your tax year end P60 so it is simply reported as employment income. Any capital gain, as mentioned by you in 2 above, would be reported in the capital gains pages of the tax return.

If shares vest after you leave the employer, the gain will still be suibjected to income tax. I tend to use boxes 3 and 6 in the share schemes section on page Ai2 of the SA101 pages here for clients.

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

Customer: replied 1 year ago.
Hi. Thank you so much for your quick response. These are RSU's rather than stock so my understanding is that I own what is vested unlike stock options where you have the right to buy what is vested. The company have cancelled my stock options but I keep the RSU's.So the bot***** *****ne is that any of the RSU's that I own and sell at above the vesting price (the price at which I have already paid tax on) I have to report the difference as CGT in my self assessment on the pages you outlined. If I sell at below the vesting price, there is no requirement as the tax has been already taken off and included in my P60/P45 and there is no Capital gain.
Expert:  TonyTax replied 1 year ago.

If the disposal proceeds of all your capital transactions in any one tax year exceed four times the annual CGT exemption (£44,400 (4 x £11,100)), the transactions have to be reported regardless. You will need to claim losses by reporting them to HMRC as if you don't do that within four years of the end of the tax year in which net losses were incurred, you lose the right to use them.

Customer: replied 1 year ago.
that's irrespective of whether it was a gain or loss. In my case, currently if I sold all my RSU's its around $22k so in that case it's within the allowance so I dont have to report the proceeds in my self assessment?
Expert:  TonyTax replied 1 year ago.

That's correct.

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Customer: replied 1 year ago.
Thank you. One final clarification. So the tax year CGT allowance of £44k applies to ALL the proceeds of a sale, rather then any incremental gain (difference between the price they vested at and the price I sold at). I always assumed it was the latter.Either way, it seems given the amounts involved that I shouldn't have to declare any proceeds rather focus on repatriating the loss as I'll most likely end up selling at a loss so I effectively will have paid too much tax.
Expert:  TonyTax replied 1 year ago.

You can make £11,100 of gains in the 2016/17 tax year and pay no CGT. If your total proceeds of all capital transactions is £44,400 or more, you have to report them whether you make gains or not. Look under the heading "How do I report capital gains to HMRC?" here. If the total proceeds are less than £44,400 but you make gains in excess of the annual exemption, you have to report them. Net losses for a tax year should be reported to avoid losing the right to use them.

The CGT and the income tax liabilities on your RSU's are separate from one another.

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