Tax on Employee Share Options (Unapproved Scheme)?

Tax on Employee Share Options (Unapproved Scheme) for UK Resident NonDom Remaining in/Leaving the UK

Didn't find your answer?

Hi All,

I have some questions regarding the taxation of employee share options for an "unapproved scheme" in case I exercise the options, in 2 cases: remain in the UK, leave the UK.

To give you the full picture, I am an employee of a tech company, and I've got some share options in the company as part of my compensation package. In particular, all the share options are vested and I'd like to know the tax treatment in case I'm going to exercise the options.

As a further detail, I am living and working in the UK (and I was living and working in the UK when I've been granted the options, and the subsequent period in which they have vested), but I have an European passport and not a British one (I'm an expat) so I can be classified as a resident non-dom (resident non-domiciled).

My questions are based on 2 scenarios:

  1. I remain resident in the UK, hence a tax resident, and I exercise the options. I know that income tax is charged on the exercise of the options, on the difference between the market value of the shares at the date of exercise and the amount paid for the shares under the option. My question is:
    • how am I supposed to pay the taxes if the underlying shares are non publicly traded (the company is still private), and I don't have the full cash to pay the taxes?
    • Is maybe the tax payment postponed to when the shares are sold in a liquidity event (e.g., if the company becomes public and starts trading in a stock exchange)?
    • That said, I have to ask my company how they could/should handle the situation.
  2. I leave the UK for a foreign country, I become tax resident of such foreign country, and I exercise the options. My question is:

My final questions is:

  1. Do you know of any tax professional (accountant, etc.), well versed in such matter, that could help me with the above?

Many thanks

Replies (4)

Please login or register to join the discussion.

avatar
By David Ex
08th May 2024 10:00

SergeGardien wrote:

Do you know of any tax professional (accountant, etc.), well versed in such matter, that could help me with the above?

https://find.icaew.com/

Other professional bodies are available

Thanks (2)
avatar
By Tax Dragon
08th May 2024 11:01

This is a pure tax matter, not an accounting one, so if you are appointing a professional you would be well-advised (imho) to choose either an accounting firm large enough to include dedicated tax staff or use a CIOT member. Don't choose a one-person band accountant as the chances are high that you'll get completely duff advice.

I should have thought though that your employer would be able to give you some steer about your questions, for free.

Thanks (3)
Replying to Tax Dragon:
avatar
By SergeGardien
08th May 2024 22:01

Many thanks for the advice, it makes sense.

Tax Dragon wrote:

...choose either an accounting firm large enough to include dedicated tax staff...

Is there a website (or something similar) where I can get a list of these where it is explicitly mentioned their tax expertise.
Or maybe do you have a short list of firms you know have a dedicate tax staff?
In case you cannot write such list here (I'm not sure it is possible, to avoid any publicity), I guess you can send me a private message?

Tax Dragon wrote:

... or use a CIOT member.

The CIOT page with the list of members seems down:
https://pilot-portal.tax.org.uk/utilities/ciot/find-a-member
Is there another way of consulting their list of members?

Tax Dragon wrote:

I should have thought though that your employer would be able to give you some steer about your questions, for free.

Yes, they definitely have info regarding scenario 1, but I prefer to avoid asking them right now, in particular about scenario 2, as I could give them the impression that I'm thinking of leaving the company.

Thanks (0)
avatar
By Dimi Pro
17th May 2024 07:25

Please don’t take this as definite wisdom but in my knowledge at least in USA and some other countries taxation of employment based stock options upon exercise is a deferred tax event. Meaning that the taxable event happened at the grant date and is deferred until exercise. Under this view your option exercise income( FMV at exercice less strike price ) will always be taxable as uk employment income regardless of your tax residency at time of exercise. But this is a point for a UK tax specialist to opine as other people suggested above.

Thanks (0)