Share Award Plans
Tax liability share dealing services for participants
As Long-Term Incentive Plan, Performance Share Plans or similar nil cost options are discretionary, you need a reliable service for your most important employees.
NatWest Stockbrokers is highly experienced in this area and our service offers:
- Share Dealing to satisfy tax and NIC (or equivalent) liabilities
- Sell or keep the balance of shares
- Online or paper receipt of instructions
- Price limit so the participant can sell at their pre-determined price
- Dedicated Helpdesk for share plans enquiries
- Worldwide distribution of sale proceeds
A share award is an award of shares that the employee can receive in a set period of time in the future, depending on certain performance conditions being met.
There are several types of share awards, with the most common being:
- Long Term Incentive Plan
- Performance Share Plan
- Annual Bonus Plan
- Restricted Share Scheme
- Nil cost option
- Deferred Bonus Plan
When the award vests, the participant is subject to income tax and National Insurance Contribution (or equivalent) on the profit element.
Mr Smith has been awarded 50,000 shares in ABC plc, which will vest after a set period. Share price on vesting is £2.50.
| Profit calculation for tax and NIC liability | £ |
|---|---|
| Current value (50,000 x £2.50) | 125,000.00 |
| Award cost (Nil cost option) | (0.00) |
| Profit on vesting | 125,000.00 |
| Sell to cover tax and NIC | |
| Tax liability on profit @ 40% | 50,000.00 |
| NIC on profit @ 1% | 1,125.00 |
| Total deductions to pay | (51,125.00) |
| Shares sold to cover liability = 20,500 (£51,250 / 2.50) | 51,250.00 |
| Net proceeds after sale and deduction of liabilities | 0.00 |
| Balance of shares received = 29,500 | |
| Sell all shares | |
| Sale proceeds from sale of 50,000 at £2.50 | 125,000.00 |
| Less | |
| Tax liability on profit @ 40% | 50,000.00 |
| NIC on profit @ 1% | 1,250.00 |
| Total Tax and NIC to pay | (51,250.00) |
| Total net proceeds | 73,750.00 |
Any further sales of your balance of shares will also generally be liable to CGT with the base cost being the price used to calculate the income tax liability.
Please note that this example does not include, or allow for, any fees or charges.