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ERS acquired at more than market value

Any tax relief available on employment related securities acquired at more than MV?

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Good afternoon,

An employee of a start up company has the opportunity to exercise his option on vested shares. The option price is say £5,000 and shares are currently valued at £4,500. I understand no charge to income tax will arise at exercise, however is there any immediate relief on the difference?

Or is the relief only given when the employee eventually sells the shares (hopefully at a profit) and the base cost is then the actual price paid at exercise rather than the market value?

Thank you

Edit: this is an unapproved share scheme and shares are not RCA

Replies (3)

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By Ruddles
29th Jul 2018 11:48

No immediate relief and yes base cost will be what is paid for them. One has to question the wisdom of paying more than the shares are worth, but perhaps there is the prospect of dividend income on them.

Thanks (1)
Replying to Ruddles:
By Chipette
29th Jul 2018 12:36

Thanks Ruddle. They think the company will be acquired and are willing to take the risk so as to avoid an income tax charge and NIC (47% + er NIC) further down the line; and pay CGT rate instead.

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Replying to Chipette:
By Ruddles
29th Jul 2018 12:41

Yep, that would be another reason.

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