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Income tax on shares purchased

How to record payment of PAYE and NI on employee share purchase

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Some employees have been offered a previous Director's shares but the fair market value is higher than the price they have paid.

The solicitors have asked the employees to send payment for the shares plus the PAYE, NI and stamp duty to the company so the company can pay the tax liabilities to HMRC on their behalf.

How can we transfer this amount to HMRC? Should it somehow go through payroll or would it be a seperate payment to HMRC? 

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By Tax Dragon
21st Aug 2019 17:46

davegriffin1-AT-hotmail.com wrote:

...so the company can pay the tax liabilities to HMRC on their behalf.

I'd hazard a guess that you've misunderstood something there. The employees are likely reimbursing the company for its costs.

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Psycho
By Wilson Philips
21st Aug 2019 18:07

Why is PAYE and NI being applied?

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By Justin Bryant
22nd Aug 2019 09:42

This is being done to prevent a s222 ITEPA 2003 gross up charge presumably. Just Google that.

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Replying to Justin Bryant:
Psycho
By Wilson Philips
22nd Aug 2019 10:09

That doesn't explain why the solicitors consider that PAYE/NI is applicable.

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Replying to Wilson Philips:
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By Justin Bryant
22nd Aug 2019 10:14
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Replying to Justin Bryant:
Psycho
By Wilson Philips
22nd Aug 2019 10:26

My point exactly - I have seen too many advisers, both accountants and lawyers, that think that PAYE/NI must apply automatically.

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Replying to Wilson Philips:
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By Tax Dragon
22nd Aug 2019 11:26

I'm in the rare position of agreeing with everything that everyone has said.

Oh Happy Day.

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By paul.benny
22nd Aug 2019 11:59

We appear to have one shareholder selling shares to others, with the Company facilitating the transaction.

I'm not expert in this area but it's not obvious to me why such a transfer of shares creates a payroll tax liability - even if the vendor is selling at undervalue.

Absent more information, I'd also question the basis of the market valuation. Minority holdings in unquoted companies (if that is the case here) are difficult to value definitively.

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Replying to paul.benny:
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By unearned luck
22nd Aug 2019 15:52

It's because the employees' opportunity to acquire the shares has arisen by reason of their employment. Absent the family and personal exception, the law deems the transfer to be by reason of their employment even if, as a matter of fact, it hadn't been.

I agree with the others that it seems unlikely that the shares are RCAs and therefore PAYE/NIC doesn't need to be accounted for. This is a timing difference for IT but an actual saving re the NIC.

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