Flashcards in Chapter 16 CGT and employee share schemes Deck (2)
CGT and share schemes
CGT and share schemes – employees generally acquire shares in their employer company by either an award of shares in a share incentive plan or on the exercise of a share option. For CGT purposes the base cost of the shares will be the amount paid by employee for the shares plus amounts chargeable to income tax on the acquisition of the shares. The only exception is with regard to shares acquired from a share incentive plan where the base cost of the shares is equal to the market value of the shares at the date they are withdrawn from the plan. Employees generally withdraw the shares from a SIP immediately prior to sale, so no chargeable gain would arise. Gains will therefore arise on SIP shares if there is a delay between withdrawing the shares from the plan and selling them. In most cases of a tax advantaged share option, the amount chargeable to income tax on exercise will be nil.