No Tax advantage share scheme

Question 1

Describe a non tax advantaged share scheme

Answer 1

Often used to provide shre to incentivies higly paid executive where tax advantaged schemes would not offer the flexibility or value of share awards

When excercised alway subject to income tax and NI (if readily convertable asset)

Question 2

If readily convertable what is often written into the share option agreement

Answer 2

That the employers class 1 seconday NI (13.8%) is covered by the employee. This is treated as a cost for the employee when calculating employment income (but not class 1 primary)

Proforma
1)MV @ date of excerice - cost at grant
2) calculate class 1 primary and secondary
3) Minus secondary from anaswer in 1 = employment income subject to IT

Question 3

How do you calculate capital gains on non tax advantage shares

Answer 3

Proceeds MV when sold
Less; Cost
Less: Amount charged to IT

If sell shortly after excecise no CGT consequences.

Short cut cost = MV at excercise date
Class 1 Secondary liabilty no an allowable cost for CGT purposes