Neil Smalley

If I have some share options from a newly formed company, is there a way of reducing CGT payable on them. I seem to remember(probably wrongly) that it's reduced if you keep them for more than 3 years?

Vonzack

My company did this a few years ago, this is from memory so ahem:

I think the 3 years is correct, however we could sell a percentage of our share options each year on the aniversary of the grant.

I think the personal allowance is something like 7,500 before CGT is applied and there are also some complicated rulings about the value of the shares.

When you received the share options they would have had a projected market value at the time of grant, if when the options are realised the value is below this amount you can offset the loss against CGT.

Talk to an accountant about it, they will know what the best course of action is for your particular situation.

Pete The Biker

These were the notes from my maturing share option 12 months ago..... hope they help:-

If shares are transferred into an ISA within 90 days of release from the share option scheme, then the transfer does not attract CGT. Otherwise………

Taper relief

If shares are sold and a gain realised on which CGT may be payable, provided the shares have been held for a minimum period, there may be an entitlement to what is called Taper Relief. Taper relief effectively reduces the amount of CGT which may be payable and the amount of the relief that applies depends on how long the shares have been held. There are two forms of taper relief, one for Business Assets and one for Non-Business Assets. This is an important distinction as Taper Relief is more generous for Business Assets than Non-Business Assets. If you hold [my employer plc] group shares and are employed by a company within the Group, the shares will be classed as Business Assets. If you cease being employed by a Group company the shares will usually be classed as Non-Business Assets from that date. For example, Taper Relief on any shares sold after 5 April 2002 and held for at least two years by an employee of a Group company, will reduce the proportion of gain chargeable to 25% of the actual gain. For a taxpayer paying tax at the rate of 40% this means that the effective rate of tax payable will be 10% of the gain and for a basic rate taxpayer, 5% of the gain. Taper Relief was introduced in 1998 and various changes have been made to it since then. This can be a complex area of tax planning and it would be advisable to seek professional assistance if you wish to investigate the possibility of relying on this relief.

Share Identification Rules

If you have acquired shares at different times, care must be taken when selling shares because of the CGT share identification rules (i.e. the CGT rules specifying which shares you will be treated as having disposed of in any situation). Again, you should seek professional assistance if you require further advice in this respect.

Self Assessment

If your gains for the tax year 2003/2004 are more than £7,900 then you need to report them to the Inland Revenue. It is your responsibility to notify the Inland Revenue whether you receive a Tax Return or not. Failure to do so may result in penalties being imposed on you. Simply because you do not receive a Tax Return to complete, you should not assume that a Return does not need to be completed. If, when the shares are disposed of, a liability to CGT is unavoidable, any tax payable on the gain will be due by 31 January following the tax year of the sale. In other words, if you dispose of shares in the tax year ending 5 April 2004, any CGT due would be payable by 31 January 2005.