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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 14857
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I need help with understanding how to best proceed with my

Customer Question

Hello, i need help with understanding how to best proceed with my stock options
JA: Have you talked to a tax professional about this?
Customer: not yet, i need to talk to one
JA: Anything else you want the Accountant to know before I connect you?
Customer: no
Submitted: 8 days ago.
Category: Tax
Expert:  Sam replied 8 days ago.

Hi, Sam here , one of the UK tax Experts here on Just Answer, thank you for your question and I shall reply shortly

Expert:  Sam replied 8 days ago.

Hi

Can you advise further so I can determine whether its tax or financial help you need

 

Thanks

 

Sam

Customer: replied 8 days ago.
Hi Sam, to add more information: I have been granted stock options in Jun 2018 by a private company outside of the UK (I'm not employed by the company). Within the next 3 or so months this company will be acquired and I will have a chance to exercise my options. I need to understand the following things:
- How shall I report the grant in my HMRC form since it's a privately owned company and I don't know how to evaluate the options
- If the company is bought what tax will I need to pay on the exercised stock?
Expert:  Sam replied 8 days ago.

 

Hi

 

As you were never employed by this company the benefits within employer schemes will not apply so simply put The tax hit depends on where you set the exercise price for the options. There is no tax liability on grant of the option, but the option holder pays income tax on market value (at point of exercise) minus strike price and then capital gains tax on the disposal price minus market value at exercise. Because of the tax disadvantages with unapproved options, it’s more efficient for the option holder to exercise as early as possible after vesting, in order to reduce the income tax charge, therefore we would normally suggest quarterly (or even every six months) exercise dates. This is unlike EMI options, where exercise has no tax consequence, assuming the exercise price matches the HMRC valuation agreed when the scheme is set up. These are reported on the additional information page of the self assessment for the exercise point and on the capital gain page at the disposal (sale price) Thanks Sam

 

 

 

 

Customer: replied 8 days ago.
Thank you. I'm not sure I understood everything correctly. The grant price (exercise price) of options was $0.1 - however obviously these options were worth more at the point they were granted. How do I report this on my 2018/2019 tax return? Does it mean that I have income tax on the $0.1? And then if the company is sold and therefore my stock options are exercised let's say for $50000 does it mean that all of this is taxed as capital gains?
Expert:  Sam replied 8 days ago.

Whatever the value at the point of exercise less the $0.1 less fees is the rate on which income tax is paid and you declare this on the foreign income page - then when you dispose of them you complete the foreign income page against and this is the difference between the market value at disposal less the market value at excercise - Thanks Sam