Unapproved Share Options
Cashless Exercise facility for participants
Choosing the right facility to ensure the participant feels secure 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
- Tax liability sent directly to company
- Online or paper receipt of instructions
- Price limit so the participant can sell at their pre-determined price
- Dedicated Helpdesk for share plan enquiries
- Worldwide distribution of sale proceeds
A share option granted by a company to an employee, is a right to buy a share at a fixed price, the option price, after a qualifying period, normally 3 years. Share options that are granted outside of the HMRC limits, (see Approved) are considered to be unapproved and therefore have different tax implications on exercise.
The profit on exercise, the difference between the sale price/market value and the option price, is subject to income tax and National Insurance Contributions (or equivalent).
Mr Smith has been awarded 50,000 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.
| Profit calculation for tax and NIC liability | £ |
|---|---|
| Current value (50,000 x £2.50) | 125,000.00 |
| Option cost (50,000 x £1.00) | (50,000.00) |
| Profit on exercise* | 75,000.00 |
| Sell to cover option cost, tax and NIC | |
| Option cost loan | 50,000.00 |
| Tax liability on profit @ 40% | 30,000.00 |
| NIC on profit @ 1% | 750.00 |
| Total deductions to pay | (80,750.00) |
| Shares sold to cover liability = 32,300 (£80,750.00 / £2.50) | 80,750.00 |
| Net proceeds after sale and deduction of liabilities | 0.00 |
| Balance of shares received = 17,700** | |
| Sell all shares | |
| Sale proceeds from sale of 50,000 at £2.50 | 125,000.00 |
| Less | |
| Option cost loan | 50,000.00 |
| Tax liability on profit @ 40% | 30,000.00 |
| NIC on profit @ 1% | 750.00 |
| Total deductions to pay | (80,750.00) |
| Total net proceeds | 44,250.00 |
* Does not have to exercise all options at the same time.
** Any further sales 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.