Tax Partner Pro – Your Q answered Oct 25
Find out what we have been answering for you this month…
Q
If the company issues shares to an employee, how is that reported/taxed?
A
Shares issued to employees fall under the Employment Related Securities (ERS) legislation. The value of the shares will usually be reported on form P11D. Online reporting is required by 5 July following the end of the tax year.
With regard to the tax payable, obviously this will depend on the market value of the shares. It is important to have a robust valuation. For a trading company the valuation will usually be based on a multiple of the company’s maintainable earnings to arrive at the Enterprise Value of the company. Surplus cash can be added to arrive at the Equity Value.
Depending on the number of shares issued a discount can be applied to the pro-rata value of the shareholding. For holdings of 5% or less HMRC will usually accept a discount of at least 70%.
Q
Apart from EMI share options what other share schemes are popular?
A
Not all companies qualify for EMI so instead a Company Share Option Plan can be used. Not as attractive as EMI as the maximum value of share options under CSOP is £60,000 and the shares have to be help for 3 years.
For smaller companies, growth shares are increasingly popular and can incentivise employees. The shares will only have value when a specified hurdle is achieved, which means that on issue HMRC should accept that the value of the shares is low/par value.
Q
I have a client that returned to the UK during the 2023/24 UK tax year after 10 consecutive years of non-residence. When will their first year of residence for FIG purposes be?
A
Although the FIG regime started on 6 April 2025, you can still be a qualifying new resident from the 2022/23 tax year. So in this case, the client’s first year of residence under the FIG regime will be 2023/24.
