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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 5829
Experience:  FCCA FCMA CGMA ACIS
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I would like some advice with regards to capital gains can

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Hi, I would like some advice with regards ***** ***** gains can you help?
Assistant: What are the assets or property for this capital gain?
Customer: RSUs (class A) and shares from an employee stock purchase plan
Assistant: Anything else you want the Accountant to know before I connect you?
Customer: yes, I wanted to double-check the amount of tax paid on a previous batch of options sold earlier this year

Hello, I am one of the experts on Just Answer and pleased to be able to help you with your question.

Were these share purchase schemes HMRC approved?

Customer: replied 25 days ago.
I don't believe so. It is a US organisation and Options were taxed at source (when sold) and the RSUs and ESPP income tax and NI paid from PAYE
Customer: replied 25 days ago.
I can provide more specifics if this helps

The NI charges are incorrect. On the sale of approved share option schemes the only tax liability is for Capital Gains Tax (CGT) on the difference between the option price and the net selling price. This is levied at 10% or 20% or a combination of the two rates depending on your income including the gain in the tax year of disposal. You have a non cumulative Annual Exempt Amount (AEA) of 11.7K to offset any gain. You must take up these imporper NI charges with your employer, but I warn you recovering overpaid NI is very difficult.

I do hope that you have found my reply of assistance.

Customer: replied 25 days ago.
Can I give you a specific example?
Customer: replied 25 days ago.
sold my shares (3000 options) of this year. My strike price was $4.28 and I sold at $28.00.
I then paid tax on it (I presume this was income and NI) on the shares sold (image below), leaving me with $25,284.
Customer: replied 25 days ago.
my general income is around £150k

This is US taxation and you are liable for UK CGT on the gain also. Any US tax is allowable as a tax credit against your UK liability through the Double Taxation Treaty between the two countries.

I do hope that you have found my reply of assistance.

Customer: replied 25 days ago.
thank you for letting me know. Is this something that will get resolved once I have submitted my self-assessment? Also, can I expect to pay less tax or more as it seems to me that you are seeing that I would still need to pay CGT on the 25k?

You can declare this gain on your self assessment tax return for the relevant year. You will need to pay CGT on the gain made between the net selling price and the option price,

Please be so kind as to rate me before you leave the Just Answer site.

Customer: replied 25 days ago.
thanks - will make sure to rate you. However, I am still unclear on what deductions have taken place at source to take me from 84183 USD to 25k USD, which is an approximately 70% reduction
Customer: replied 25 days ago.
Presuming my income tax is 45%, my NI 2%, where would the additional 23% stem from?

With holding taxes in the States can be very high indeed. You may well have fallen foul of these although the usual rate for foreigners is 30%. You should take this matter up with the paying agent.

Customer: replied 25 days ago.
Is the paying agent in this instance my employer or the broker?
Customer: replied 25 days ago.
Also, can I expect a similar treatment when I sell RSUs and ESPP with regards ***** ***** withholding of tax?

From the way that these transactions are being handled I fear so.

From your answer it would appear to be the broker.

Customer: replied 25 days ago.
ok - I can take it up with them. However, just so I am completely clear on this: this is something that should happen (ie they have held this and I am not entitled to it back through mechanisms such as my self-assessment) or that I should be expecting more of my money from this transaction?

I think you should be expecting more from these transactions, but maybe the agent is making heavy deductions also.

Customer: replied 25 days ago.
would you advise that I raise this with the agent now or hold off until I have clarity from my tax return (presuming that will provide more clarity)?
I am trying to buy a house at the moment and would be looking to use income from shares towards my deposit. The bigger my tax burden, the less I have to provide upfront, hence I am really trying to nail this down.

I would suggest that this would be an excellent approach.

Customer: replied 25 days ago.
it looks like, from my research, that the tax would be recouped from the withholding party (the broker) once I put together my tax return for end of January 2019. Is that assumption correct?

That is possible although if you recover the with holding tax you will loose the tax credit it creates.

Customer: replied 25 days ago.
I have spoken to my broker and they have provided me with the following breakdown
Gross proceeds: $84,183.45
Minus Taxes: $46,084.65
Minus exercise cost: $12,840.00
Net proceeds - $25,258.80
The taxes were determined by the employer.
Customer: replied 25 days ago.
How much capital gains would I expect to be paying. As I am a tax payer with a tax code of K786, I would anticipate that this would be a lot...?

CGT is levied at 10% or 20% or a combination of the two rates depending on your income including the gain in the tax year of sale. In your case it would all be at 20%.

Customer: replied 25 days ago.
this is very depressing news. I anticipate that I will be able to defer this if I sell after April 5th?
Customer: replied 25 days ago.
by which I mean only up to the 11.7k threshold

Yes, and by then the AEA will have risen again, I hope!

Customer: replied 25 days ago.
I hope so too - all of this is terrible news thusfar - I would expect to pay 20% CGT on the sale of my RSUs and ESPP, right? Any other taxes I can expect?

No, CGT is the only tax this attracts, but do not forget the tax credits if the US tax position cannot be sorted out.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 25 days ago.
ok - at least that provides me with some clarity. Thank you for your help on this! I really appreciate it.

Thank you for your support.