Employee shares from US company - tax treatment

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Please can anyone help me determine the tax treatment for shares received from a US company to an employee who worked for them. when they were issued in 2010.

The US company was sold last year so he has been paid out on them (c£35k)   He's been advised by the Company there is no US tax to pay and was issued a W-8BEN by them.  My client is a high rate tax payer.

Usually this is a straight forward tax return to do (P60 and dividends) but this has thrown me. 

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By David Ex
29th May 2024 12:17

Absent any further information, is the gain not just proceeds less cost?

What’s your thinking?

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By legerman
29th May 2024 12:54

David Ex wrote:

Absent any further information, is the gain not just proceeds less cost?

What’s your thinking?

There are no costs so just the gain, but reading up I came across nso, iso, sip and share option plans and to be honest I'm lost. It would seem that the tax treatment can range from 0% cgt to income tax and NI if it's a nso or non taxed advantage scheme. The client described it as a stock option plan but has no further details.

I'm fairly confident its not 0% cgt and I'm rather hoping it's not income tax and NI, as that would be at 42% on the lot.

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Replying to legerman:
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By David Ex
29th May 2024 13:25

legerman wrote:

David Ex wrote:

Absent any further information, is the gain not just proceeds less cost?

What’s your thinking?

There are no costs so just the gain, but reading up I came across nso, iso, sip and share option plans and to be honest I'm lost. It would seem that the tax treatment can range from 0% cgt to income tax and NI if it's a nso or non taxed advantage scheme. The client described it as a stock option plan but has no further details.

I'm fairly confident its not 0% cgt and I'm rather hoping it's not income tax and NI, as that would be at 42% on the lot.

I assume it’s not a UK tax “favoured” shareholding so won’t benefit from associated reliefs. What tax was paid on the shares originally if they were given for nothing?

Is the client still an employee of the company? What proportion of the company did the shareholding represent?

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Replying to David Ex:
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By legerman
05th Jun 2024 15:20

David Ex wrote:

legerman wrote:

David Ex wrote:

Absent any further information, is the gain not just proceeds less cost?

What’s your thinking?

There are no costs so just the gain, but reading up I came across nso, iso, sip and share option plans and to be honest I'm lost. It would seem that the tax treatment can range from 0% cgt to income tax and NI if it's a nso or non taxed advantage scheme. The client described it as a stock option plan but has no further details.

I'm fairly confident its not 0% cgt and I'm rather hoping it's not income tax and NI, as that would be at 42% on the lot.

I assume it’s not a UK tax “favoured” shareholding so won’t benefit from associated reliefs. What tax was paid on the shares originally if they were given for nothing?

Is the client still an employee of the company? What proportion of the company did the shareholding represent?

Sorry for the delay in getting back to you.

No tax was paid on the initial shares, they were given to a handful of employees who had been there when the Company was in it's early stages. It is a software company which grew massively, so the shares will have been a very small percentage. The client left in 2016 and the Company renamed itself in 2023 and bought back the shares.

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By David Treitel
29th May 2024 18:59

Sounds like a typical stock option. It vested - say - 7 years ago. The client held the shares are vesting and has now sold the shares. The cost is the value on the vesting date. All the data will exist, clients are frequently lacking in understanding with stock options, so you may need to assist the client to find the data.

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By Dimi Pro
31st May 2024 04:22

If your client in 2010 was granted these options because of his employment while a UK tax resident then it’s rather clear that there are non approved employee options and should be taxed as income at the date of exercise.

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