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 bigduckontax Your Own Question
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4953
Type Your Tax Question Here...
bigduckontax is online now

My question is on capital gains & deferred consideration, when

This answer was rated:

My question is on capital gains & deferred consideration, when I'm not eligible (having left the company) to any of the deferred consideration, what my tax burden is, and how to report it.
I had EMI stock options in a company that was sold in 2013, exercising my options in the tax year 2013/14 which I am now doing a Self Assessment for. My tax situation regarding was complicated (I'd worked in two other countries in addition to the UK during the period of owning the stocks, which meant my tax burden was split proportionally between the jurisdictions in the UK, the US and Finland). Also as I've not had to pay CGT before, and the shares were under EMI, I'd understood that I did not have any tax burden remaining after the amount of payout that I received.
However, the deal came with an earnout period, meaning I was paid for only a minority part of my ownership in the initial consideration. I left the company soon after, so I was/am not eligible for the earnout. The earnout's exact amount was also contingent on the company hitting certain targets.
It does not seem reasonable to me that I would now owe CGT in full for the full amount of my gains (including earnout period), when that is not gains that I could in any way actually materialise.
The full tax bill would be almost the full amount of what I actually received.
Putting aside the multiple-jurisdiction question at first, for the UK part of this, how do I report this to HMRC? Can I report my gains for 2013/2014 as the pre-earnout part that I actually materialised?
Hello, I'm Keith and happy to help you with your question.
Did you exercise your EMI options and dispose of the holdings on the same day the options vested? That is the normal procedure.
On receipt of that information I may be able to assist you further.
Customer: replied 3 years ago.

hi Keith, thanks for picking up my question. Yes, I believe I did.

Then there is no capital gain to report; it's standard practice in these situations and quite commonplace. You did not own the stock until the option vested and you disposed thereof on the same day so there is no capital gain on that transaction.
Customer: replied 3 years ago.

That's it – that explains it. Thank you!

Delighted to have been of assistance.
Please be so kind as to rate me before you leave the Just Answer site.
bigduckontax and other Tax Specialists are ready to help you
Thank you for your support.