PT42 Non tax advantaged share option schemes

Question 1

Non tax advantage schemes - There is always an income tax charge at ….

Answer 1

exercise

Market value at exercise X
Less: Amount paid for shares (X)
Amount charged to income tax X

Question 2

Non tax advantaged schemes

The exercise must be …

Answer 2

reported to HMRC online.

Question 3

Non tax advantaged schemes

Amounts charged are subject to PAYE/NICs if …

Answer 3

the shares are readily convertible assets.

Question 4

Non tax advantaged schemes

If the employee pays the employer’s NICs liability….

Answer 4

the amount paid reduces the amount charged to income tax.

Question 5

Non tax advantaged schemes

A capital gain will arise if …..

How is this calculated?

Short cut?

Answer 5

the shares are sold for proceeds in excess of the market value of the shares at exercise

Sale proceeds X
Less: Amount paid for shares (X)
Less: Amount charged to income tax on exercise (before relief for any employer’s NICs) (X)
Gain X

As a short cut, the gain is equal to sale proceeds less market value at exercise.