My understanding for employees is as follows
If the option has to be exercised within 10 years of its grant, there will be no tax or national insurance charge when the option is granted.
On the exercise of the option there will be an income tax liability on the difference between the market value of the shares at that date, and the price paid for them.
On the disposal of the shares, the capital gain is calculated by comparing the disposal proceeds to the market value of the shares when the options were exercised.
There will be no national insurance charge on the grant or exercise of an option if the shares over which the options are granted, are not readily convertible into cash, which means there are no arrangements by which the shares’ value can be realised with certainty. In practice this means that there is no available market, no arrangements made by an employer to repurchase the shares and the company is not quoted on a recognised stock exchange (e.g. FTSE). For this purpose, AIM counts as unquoted.
On exercise, the company will obtain a corporation tax deduction for the difference between the market value of the shares at that time less any amount paid by the employee for the shares.
So couple of questions:
- Is the tax treatment the same for non-employees?
- Is an NED or other director an employee by the fact they are an "office holder"? If not do they become one by having some form of agrement to carry out certian commitments of time?
- Is a consultant an employee if they have a contract with the company to provide certain services?
Thank you for any advice as i have previously assumed the tax treatment was the same for all