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Sam, Accountant
Category: Tax
Satisfied Customers: 14195
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Have some share options in a limited company that I work

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Hi, have some share options in a limited company that I work for and I can now change into actual shares [after waiting five years] Have been told that if I did this there would be tax to pay, is this correct ? Thank you for your help
Thanks for your question
No - that would apply to the share award scheme (actual awarding of shares whereas this would appear to be a share option scheme (where you are permitted the right later on to make a purchase at a fixed price)
Share options are then subject only to Capital Gains on sale.
Only the share award subjects the shares to tax and National Insurance (if in excess of £2000) as they are treated as a reward linked with employment and then there is also the charge of tax and national insurance on any profits made (difference between the award value - NIL and the sale value) although some UNapproved schemes are subject to capital gains on disposal.
I think you need to go back to your employer and establish the position as they seems to be mixing the two main schemes up! Although this may be another unapproved scheme - so do come back if you need to.
Link here with a very basic overview of the types of schemes.
Let me know if I can be of any furtehr assistance at this time but it would be appreciated if you rate me for the level of service I have provided.
Customer: replied 2 years ago.


Thank you for your response

The agreement drawn up by a solicitor acting for the company at the time clearly states SHARE OPTION AGREEMENT, where I can purchase a set amount of shares for 10p after five years.

How can I be sure ?

Thank you

Hi Then you should NOT be charged tax and National Insurance at purchase as one would assume that you will pay the agreed price at the time the vesting period was agreed HMRC state4. Company Share Option PlanThis gives you the option to buy up to £30,000 worth of shares at a fixed price.You won’t pay Income Tax or National Insurance contributions on the difference between what you pay for the shares and what they’re actually worth.You may have to pay Capital Gains Tax if you sell the shares. It does not get any clearer than that - on the basis of what you advise so whoever is telling you that you will be subject to tax and National Insurance when these are "bought" needs to brush up on their tax knowledge as they are wrong Thanks Sam
Customer: replied 2 years ago.


Thanks again

I am buying 326 shares at 10p so well below the threshold

I guess I can insist on the purchase as per the agreement, is there any way that I could end up with a tax liability other than from the sale of the company at some point in the future ?

Thanks for your response
No none at all - as long as stay within the agreed limits and this is a share option scheme (which it seems that way to me as per the details you have provided) then there is only a consideration for tax (capital gains) when you sell these shares.
Let me know if you need any further help, but please do take the time to rate the service I have provided as this ensures Just Answer credit me for my time.
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