CGT windfall for company execs

Link: CGT loophole in Treasury sights

The case in question, Mansworth vs Jelly, allows members of unapproved share options schemes and enterprise management incentive plans to reduce their tax paid on capital gains made since April 2000.

Under the new ruling, the acquisition cost of shares is deemed to be their market value at the time the option is exercised, which may reduce the value of a capital gain or turn it into a loss.

Unapproved share options schemes have been one of the most popular ways to reward company directors, most notably, outgoing Vodafone chief Sir Christopher Gent, who holds 61 million shares.

Experts expect that the relief will not last long, as it offsets CGT reform put in place by Gordon Brown in his last Budget – this set a tax limit of 10% on shares that were not exercised for a period of two years.

The ruling will not benefit employees who acquired shares through approved Save As You Earn (SAYE) schemes and approved Company Share Option Plans (CSOPs). Here the acquisition cost is the exercise price paid for the shares.

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