I have a client who worked for a global company for many years and was recently made redundant. He was entitled to a variety of employee share scheme benefits specifically share options and restricted shares. In the paperwork I have received there are a variety of dates including grant, exercise and vesting. Is it reasonable to ask his former employer specifically what transactions they have agreed with the Revenue were taxable in 2006/07 or to put it another way did the employer have any obligation to advise the employee of the tax status of the transactions?
nick farrow
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If there were any reportable events ....
... as listed in section 421K ITEPA, then the employer would be obliged to report on form 42. If the shares were readily convertible assets or treated as such under s698 ITEPA the employer would have been obliged to operate PAYE. However, these are not P11D items so will not appear there. I must admit I am a bit hazy on what the employer is obliged to provide to the employee so that he can enter on his self assessment return. I think it just amounts to 'details' but I can't recall where it says this offhand. However, whatever the employer has notified your client is still obliged to enter any chargeable events on his tax return, obviosuly together with details of any PAYE suffered.
A global company ay be expected to have produced literature concerning any employee share schemes which will explain the tax implications. I would be surprised if an employee was able to leave with unexpired share options. Assuming these are not HMRC approved a tax charge would arise on the difference between the MV on exercise and the exercise price, even if they can be exercised after the employment has ceased. However, quite what happens re PAYE at that point is probably buried somewhere in statutory instruments. Obviously if someone is no longer being remunerated there is no way of recouping the PAYE, though quite often with these things the employee will have been obliged to meet the employer's Class 1 NICs, which is than added to the acquisition cost.
At any rate if this is a global company, their payroll department must - one would assume - have taken whatever action was necessary. Is it not possible just to ask the company for details of any chargeable amounts and any tax paid?
PS - it is of course possible
that the shares were acquired under a HMRC approved scheme, but again the company should be able to give details.
You're welcome.
I did have a similar thing not so long ago where the company was being taken over by a French company. It wasn't easy piecing it all together and especially as regards what shares were acquired and when and how much for, but I think the scheme itself turned out to be an approved profit sharing scheme so we were only talking about CGT. There were some options which hadn't vested as I recall but I think the employees received the difference between the option price and whatever the takeover price was, in respect of the unexpired options. Your case may be totally different of course as there are endless permutations these days.