TaxCorporate TaxHMRC changes guidance on employee share options

HMRC changes guidance on employee share options

Taxman revises capital gains tax arrangements

HM Revenue and Customs has issued updated guidance for capital gains tax
payable on employee share options, taxationweb.co.uk reported. Employees who
sell shares they acquired with options before the exercise date may be impacted.

When shares are acquired by the exercise of an option before 10 April 2003,
capital gains and losses are calculated using the the market value of the shares
on the exercise date, rather than the amount paid for the option or its exercise
price.

HMRC has received legal advice that the previous guidance issued on
calculating the amount of gain or loss is incorrect. Previously, HMRC considered
the gain or the loss should be calculated on the market value of the shares plus
any income tax paid at the time of exercising the option less the disposal of
shares.

Revenue now says income tax paid at the time of exercising the option should
not be included in the capital gain or loss calculation. It doesn’t affect most
people who dispose of shares acquired through employee share option plans, but
it may affect those who exercise their options early.

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