HMRC Approved Share Options
Cashless Exercise facility for participants
Choosing the right facility to ensure the participant is in safe hands when exercising their option is as crucial as the success of the plan itself.
That is why we ensure a smooth process for the participant when exercising their option.
We understand the importance of the client experience and offer the participant care and assistance when exercising their option. We offer:
- Finance arranged to fund the option cost
- Share Dealing to sell the resulting shares
- Online or paper receipt of instructions
- Price limit so the participant can sell at their pre-determined price
- Spouse/Civil Partner gifting to utilise Capital Gains Tax Allowances
- Dedicated Helpdesk for share plan enquiries
- Worldwide distribution of sale proceeds
Some share options are granted under a HMRC approved status. This approved status allows a company to grant options at a set price, up to a total value of £30,000* per participant. The participant can then, subject to certain qualifying conditions and generally after 3 years, exercise the option without having to pay income tax and National Insurance on the gain. However, the gain upon any future sale is generally subject to Capital Gains tax.
* £120,000 limit for Enterprise Management Incentive (for SME Companies only)
Mr Smith has been awarded 30,000 shares in ABC plc at an option price of £1.00, which he will be allowed to exercise after a set period. Share price on exercise is £2.50
| Sell to cover option cost | £ |
|---|---|
| Option cost loan | (30,000.00) |
| Shares sold to option cost loan = 12,000 (£30,000.00 / £2.50) | 30,000.00 |
| Net proceeds after sale and deduction of liabilities | 0.00 |
| Balance of shares received = 18,000** | |
| Profit calculation for tax liability | |
| Current value (12,000 x £2.50) Option cost (12,000 x £1.00) | 30,000.00 (12,000.00) |
| Profit on exercise* | 18,000.00 |
| Gift half of the shares to your spouse | |
| Option holder profit Spouse profit | 9,000.00 9,000.00 |
| CGT liability (Utilising both CGT allowances***) | Nil |
| Sell all shares | |
| Sale proceeds from sale of 30,000 at £2.50 | 75,000.00 |
| Less | |
| Option cost loan | (30,000.00) |
| Total net proceeds* | 45,000.00 |
| Gift half of the shares to your spouse | |
| Option holder profit Spouse profit | 22,500.00 22,500.00 |
| Combined CGT liability (Utilising both CGT allowances***) | 25,800.00 |
* Profit / proceeds are generally subject to Capital Gains Tax (CGT), which is not deducted at source. Does not have to exercise all options at the same time.
** Any further sales will also generally be liable to CGT
*** Assuming full yearly CGT allowance of £9,600 for the 2008-2009 tax year available to both option holder and spouse
Please note that this example does not include, or allow for, any fees or charges