EMI Share Option

EMI Share Option

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A taxpayer was granted an EMI share option in 2002 to acquire at a future date 5000 shares at 14.5p each on consideration of £1. The value of 14.5p has been agreed with the share valuation division. The company was bought in Jan 2006 and a sum of £13000 paid to the taxpayer. I assume that as the option has not been exercised, it has been released. Am I correct that the taxpayer will have an income tax charge on the difference between the sum received and the consideration paid i.e. £12,999.
Many thanks to those who can offer an opinion.
Geoff Webb

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By Taxi
26th Oct 2006 10:17

You "assume" that the option has not been exercised?
You need to find out the definite facts, as an assumption could lead to the wrong answer.
Either you client has paid 5000 x 14.5p for shares and this has been netted off against sale proceeds, or else he appears to have just sold the option. the cash result should be the same.One expects the former applied - why set up an EMI and not use it.
EMI basics - no tax charge if share price on exercise = MV at time option granted so if 14.5p was MV. All OK on that front.
Taper runs from grant of option - so assuming that we has trading co. for taper purposes, he will get his full business taper on the £13k, after deducting his annual exemption, from wht we hope is all therefore capital gain

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