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Advisory share options in exchange & non-employee

Share options given in exchange for advisory services to a consultant. Taxable?

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I have a client who is providing advice to a start up company.  In exchange for his advice, he will receive share options, exercisable at set milestones.

I am aware how share options are taxed on employees, but what about external consultants?  Would he be taxed on the market value at grant of the options, and any gains charged to CGT, or would he be taxed on the value at exercise of the options?

I cannot find any guidance for non-employees anywhere.

Any pointers greatly appreciated!

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Psycho
By Wilson Philips
15th Sep 2020 12:34

He will be taxed on whatever the parties agree is the value of the options. If he has provided consultancy services worth (ie what he would normally charge) £x and they agree that he will be given options worth £y in return then he will be assessed on £y, whether or not y happens to be the same as x.

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By Manchester_man
15th Sep 2020 15:42

Many thanks for this, much appreciated.

The shares have been offered as part of a consultancy contract, to be held in an option pool until completion of the project (next year), at which point, the shares can be purchased / option exercised, at nominal value.

Would the tax charge crystallise now (at grant) or at exercise of the options? I am thinking the latter. Would you agree?

Thanks again!

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Replying to Manchester_man:
Psycho
By Wilson Philips
15th Sep 2020 16:01

I would not necessarily agree. It's possible but it will depend on the facts.

On the face of it, the individual is providing services, presumably as a self-employed consultant, and is being paid for those services in the form of options.

I don't think that a forum such as this is the place to establish the correct treatment. If it is outside of your comfort zone than you should consider referring it to someone that is able to consider all of the facts and circumstances.

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By Manchester_man
16th Sep 2020 02:23

Why is my question any less suited to the forum than the next question? What kind of question do you deem acceptable in AnyAnswers?

In 10+ years of contributing to the forums, I have not once posted a question and then later wished that I’d never bothered asking for input; until now!

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Replying to Manchester_man:
Psycho
By Wilson Philips
16th Sep 2020 08:38

I did not say that the question was unacceptable. What I was trying to get over is that some issues are so fact-dependent that they can only be properly answered by someone dealing with the matter “hands-on”. This is one of those cases, where the correct treatment will depend on the precise facts.

I have said that the grant of the options may or may not be taxable now or later, an answer that I assume is of use to neither man nor beast. That is why I suggested that it be passed to someone “in the know”.

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By Paul Crowley
16th Sep 2020 04:27

Do not forget that VAT needs to be considered.
He sold his services and got something

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