How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask TaxRobin Your Own Question
TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 17175
Experience:  International tax
Type Your Tax Question Here...
TaxRobin is online now

I'm a UK-based employee, my employer is a US company, and annually

This answer was rated:

I'm a UK-based employee, my employer is a US company, and annually they issue stock options at a slight discount to the current price. They vest partially after one year and then more vest each month until they are fully vested at four years. The company payroll taxes me at 42% (I think high rate tax plus high band NI). They used charge the employer NI as well. My question is, is it correct to charge tax as if it were income? Why is it not capital gains tax on the increase that you have gained? For example suggests it should be.
Hello and thank you for allowing me to assist you.
If the US company has not created an approved plain the tax is on the option as income.
United Kingdom tax relief on stock option gains can be obtained by creating an approved H M Revenue & Customs arrangement ("Sub-Plan") that will attach UK tax-favoured status to options granted by a US company to either its employees or employees of its UK subsidiary.
Tax relief is available in respect of options with an aggregate fair market value of £30,000 determined at the date of grant of the option. The gains attached to options granted outside the approved arrangements are subject to UK income tax and (in appropriate cases) National Insurance Contributions ("NICs") where appropriate.
Employers NICs can be transferred to the optionee by a joint election or an agreement with the optionee. The optionee will normally receive tax relief for any employers NICs paid.
You may find the following helpful in understanding the US company's position:
TaxRobin and other Tax Specialists are ready to help you