Paying tax and NI on shares i am forced to sell???

[Big Worm 1]

I have a number of shares in the company i work for through the company share purchase scheme. The company is potentially going to be bought out in the very near future. We have all been informed that when the new business takes over, we shall be paid out in cash for any current shares we have in our payroll after the sale of the company has been completed.

For me, this was going to be a little nest egg for the future that i was building up over time, so i have no real desire to sell them yet. Because i have had a lot of these shares for less than 5 years, i will have to pay tax and NI on them. This seems extremely unfair that i will lose money selling shares that i don't actually want to sell! If i have to receive the cash for them then that's fine, i can always re-invest it, but i don't see why i should have to lose out.

Does anyone know if there is any way around this? Are there any regulations for such a situation?

[Eric Mc]

Welcome to the "democracy" of share ownership.

Small individual shareholders are easily steamrollered out of the way by the large corporates or institutional investors.

I was "made" sell my shares in BAA when Ferrovia came knocking - whether I really wanted to dispose of my shares or not.

[wattsm666]

Potentially if you don't sell now there may not be a market in the future for any number of reasons. Co. could go bust and you lose them etc. might be unfair but better than nothing.

[wattsm666]

You need to speak to an accountant about any way round it, without knowing more about how you got the shares and what causes the 5 year holding period, only once this is known can you look at ways round it.

[AlexB]

If the scheme is anything like the one I'm part of then you will have purchased the shares out of your gross salary and the agreement with HMRC is that if you hold them for 5yrs then you don't ever have to pay the tax. If you are forced to sell then you might have to pay the tax, but you should check the terms of the scheme - there are various situations in which the shares can be sold without having to pay tax (for example if you were being made redundant) and the fact that you are being forced to sell as part of a take-over might be one of those situations.
Good Luck - hope the share value has gone up!

[mrmr96]

Big Worm 1 said:

I have a number of shares in the company i work for through the company share purchase scheme. The company is potentially going to be bought out in the very near future. We have all been informed that when the new business takes over, we shall be paid out in cash for any current shares we have in our payroll after the sale of the company has been completed.

For me, this was going to be a little nest egg for the future that i was building up over time, so i have no real desire to sell them yet. Because i have had a lot of these shares for less than 5 years, i will have to pay tax and NI on them. This seems extremely unfair that i will lose money selling shares that i don't actually want to sell! If i have to receive the cash for them then that's fine, i can always re-invest it, but i don't see why i should have to lose out.

Does anyone know if there is any way around this? Are there any regulations for such a situation?

You were given the shares for free.

If you kept them long enough, then the count as an investment.

If you sell them too soon then they count as salary, hence the tax and NI.

Those were the rules when you were given them, and they are the rules now.

Bit of shame you don't get any choice in selling them but that's how being a minority shareholder works.

[Big Worm 1]

mrmr96 said:

You were given the shares for free.

I wasn't given them for free, i purchased them every month for a number of years. That is beside the point though.

I was just curious as to whether there was any way of getting around the tax and NI due to not having any choice in selling them.

Unfortunately, it doesn't sound like there is!

[anonymous-user]

Big Worm 1 said:

I wasn't given them for free, i purchased them every month for a number of years. That is beside the point though.

I was just curious as to whether there was any way of getting around the tax and NI due to not having any choice in selling them.

Unfortunately, it doesn't sound like there is!

Hang on - did you purchase the shares out of gross salary or net salary (i.e. with money you've already paid tax on?).
If the later, I would assume (I hope I'm not wrong here) that you would be liable for capital gains tax on any profit made over the yearly allowance (I think its about £10k) and therefore not liable for income tax / NI.

[anonymous-user]

You could also ask an expert http://www.justanswer.com/uk-tax/.
Costs about £10 a question.

[Big Worm 1]

AlexB said:

If the scheme is anything like the one I'm part of then you will have purchased the shares out of your gross salary and the agreement with HMRC is that if you hold them for 5yrs then you don't ever have to pay the tax.

This is exactly the situation. I paid for them out of my gross salary, so i know that prior to holding them for 5 years, they are liable for tax and NI. It is because i have no choice that i have asked the question. I was planning on holding onto them for at least 5 years but that decision has been taken out of my hands.

The question has been asked to the business to see if they can work around this. Guess we'll just have to wait and see.