Section 104 - Shares at a discount

I bought shares at a discount to MV, I pay Tax on the discount through payroll, what value for 104?

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I work for an american company that offers a Employee Share Purchase Plan (ESPP) Scheme. I contribute a percentage of my salary each month and at the end of a periodic cycle, I buy shares at a discount agianst the lowest Market Value price of the shares on the 1st or last day of the cycle. The Discount received is then subject to Tax and NI via my salary. What is the correct value to include when adding these shares to my section 104 holding ?

Example:

MV Day 1 = 100

MV last day = 150

I pay lower price of 100 less a discount of 15%, so 85. The gain of 150-85 IE 65 is subject to Tax/NI in my pay, lets assume 40% and 2%, so 27.20 Tax/NI. Effectively therefore these shares have cost me 85 + 27.2 = 112.2. Is that the correct values to use for 104 ?

I thought I'd read somewhere in the past that certain approved share schemes would allow the MV on day of purchase IE 150 to be used, but this might be limited to UK approved schemes and as this is US company, might not be valid ?

Looking forward to hearing your thoughts and experiences.

  

Replies (5)

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By paul.benny
18th Dec 2023 13:10

I know that the administrators of schemes like this are always reluctant to give advice. That said, do they not give any guidance on this point?

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Replying to paul.benny:
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By chodgkins1
18th Dec 2023 14:45

Unfortunately we get the stock response on these kind of things from the company, normally along the lines of everyone's Tax affairs are unique to them, recommend you seek professional advice.

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By David Ex
18th Dec 2023 13:24

My “man down the pub” answer would be it’s the 150 on which the income tax charge was based but whether that’s the technically correct answer, I don’t know.

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Replying to David Ex:
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By chodgkins1
18th Dec 2023 14:54

The income tax charge was not on the 150 but on the discount amount of 65. The Accountant in me says that the actual cost to me was the 100 IE what I actually paid out of my post tax salary plus the additional Tax and NI I incurred on the Discount benefit of 27.20 (65 x 42% Tax/NI), so 127.20 in total but hoping it is 150 as your man down the pub might suggest.

Looking for definitive reference post/url ideally as the reduction in CGT allowance this year and the next 2 years is going give me a bill and I want to get this right

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Replying to chodgkins1:
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By David Ex
18th Dec 2023 15:16

chodgkins1 wrote:

The income tax charge was not on the 150 but on the discount amount of 65.

Yes, I meant 150 was the “starting point”.

chodgkins1 wrote:

Looking for definitive reference post/url ideally as the reduction in CGT allowance this year and the next 2 years is going give me a bill and I want to get this right

You’ll need to pay for advice, in that case.

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