CH 6 - CGT and Employee Share Schemes

Question 1

How base cost of the share is calculated
(other than SIP)?

Answer 1

Amount paid by employee for the shares

Plus: Amount chargable to income tax on acquisision of shares (before Er’s NIC)

=

CGT Base Cost

Question 2

Define base cost of SIP

Answer 2

CGT is chargeable on the difference between;
the value of the shares at the date of withdrawal from the plan (the base cost)

and

their value at the date of sale.

Hence CGT can be avoided by leaving the shares in the trust until sale.

Question 3

BADAR & EMI shares
what you know?

Answer 3

where the disposal is of relevant EMI shares, the rules are relaxed (no need to own/dispose 5%)

BADR will be available provided:
* a. the option was granted at least two years prior to the disposal of the shares; and

• b. for at least two years prior to disposal:
  i. the company was a ‘trading company’; and
  ii. the taxpayer was an officer or employee of the company.

(TCGA 1992, s.169I(7A))

Question 4

CGT and Share Options
use of MV

Answer 4

TCGA 1992, s.144ZA disapplies TCGA 1992, s.17 (disposal at market value) in cases where assets, including shares, are being disposed of as a result of the exercise of an option.

In these cases, the disposal proceeds for CGT purposes is the actual cash changing hands.