Share plans

Question 1

For a non tax advantaged share scheme, how is it taxed?

Answer 1

Value at exercise less cost = amount treated as employment income

Question 2

For a non tax advantaged share scheme, how is a capital gain taxed?

Answer 2

Sale proceeds less market value at exercise = gain

Question 3

How much free shares can be awarded from a SIP?

Answer 3

£3,600 per annum

Question 4

If shares are withdrawn from a SIP what are the rules for being taxed?

Answer 4

Less than 3 years - market value
3 - 5 years - lower of market value at date of withdrawl or market value at date of allocation
More than 5 years - no charge

Question 5

How much partnership shares can an employee buy each year?

Answer 5

£1,800 (£150 per month)

Question 6

What is the cap on the salary when calculating if they can buy partnership shares?

Answer 6

10%

Question 7

Does an employee get tax relief buying partnership shares?

Answer 7

Yes, his salary is reduced by the amount he pays.

Question 8

How are partnership shares taxed on withdrawl?

Answer 8

< 3 years - market value at date of withdrawl

3 - 5 years - lower of cost or market value at time of withdrawl

5 years plus - no tax charge

Question 9

How many free shares can an employer match with partnership shares?

Answer 9

Two addtional free shares for every one partnership share purchased

Question 10

How are dividends from SIP shares treated?

Answer 10

Taxed as normal if employee keeps the cash but if used to reinvest into more shares then completely free of tax

Question 11

If dividend shares are withdrawn because the employee leaves, how are they taxed?

Answer 11

< 3 years - taxable in the year withdrawn.

More than three years - no tax or nIC

Question 12

When is there no charge on a withdrawl from shares of a plan?

Answer 12

Injury, retirement, redundancy or death

Question 13

What is the CGT implications of selling SIP shares?

Answer 13

Charged to CGT on the difference between price at sale and price at withdrawl - it is therefore imperative the employee sells as soon as they are withdrawn.

Question 14

Who can participate in a SIP?

Answer 14

All employees, however the company can use its discretion on employees who have been with the company for less than 18 months.

Question 15

What is the maximum discount that can be awarded in a savings related share option scheme?

Answer 15

20%

Question 16

How is the bonus on a SAYE account taxed?

Answer 16

It isnt, its tax free

Question 17

How is CGT calculated on SAYE?

Answer 17

Proceeds less purchase price.

Question 18

Who cant participate in the CSOP scheme?

Answer 18

Part time directors working less than 25 hours per week.

Individuals with a material interest - holding more than 30% of share capital

Question 19

WHat is the maximum value of shares that can be held in a CSOP?

Answer 19

£30,000

Question 20

What are the tax implications of a CSOP?

Answer 20

Exercised between 3 - 10 years - no tax or NIC

If exercied <3 years or > 10 years, tax and NIC will be charged and the same rules as non tax advantaged schemes will apply

Question 21

Qualifying conditions for an EMI scheme?

Answer 21

• Trading company with permanent establishment in UK
• Carry on a qualifying trade
• Gross assets must not exceed £30 million
• Total shares with options< £3m
• Company must not be controlled by another company
• Less than 250 full time employees
• Employee cant have material interest in company (< 30%)
• Individual options cant exceed £250,000

Question 22

Tax implications of EMI?

Answer 22

No tax or NI if exercised within 10 years of grant unless the options are granted at a discount

Question 23

How is the income tax worked out on a discounted EMI?

Answer 23

Lower of MV at grant or MV at exercise less price paid = employment income

Question 24

What is the base cost of EMI shares if sold for CGT purposes?

Answer 24

Amount paid for shares plus amount charged to income tax at exercise (if they were discounted)

Question 25

How long does an employer have to notify HMRC of an EMI option being granted?

Answer 25

92 days