CH 31 - Non-Tax Advantaged Share Option Schemes

Question 1

What tax applies to non-tax advantaged share option scheme?

Answer 1

• always an income tax charge at exercise, as follow
• • MV at exercise
• -(Less) amount paid for shares
• • = Amount charged to income tax
• The exercise must be reported to HMRC
• if shares are readily convertible assets, then they are subject to PAYE/NICs

CGT applies if the shares are sold for proceeds in excess of MV
as follow;
Sales proceeds
Less: Amount paid for shares
Less: Amount charged to income tax on exercise (before relief for any employer’s NIC)
= GAIN

If the employee pays the employer’s NICs liability, the amount paid reduces the amount charged to income tax.

Question 2

What happens should in the agreement state that employee pays the Employer’s NICs liablity in connection with non-tax advantaged share option scheme?

Answer 2

he amount paid reduces the amount charged to income tax