SolvedBIM44390 | Specific deductions: employee share schemes: providing shares to employees: qualifying shares: restricted shares: examples
From HM Revenue & Customs · Business Income Manual
Example A
Facts
| Date | - | Amount |
|---|---|---|
| 01/04/2009 | Employee is given 1000 shares, subject to restrictions that the employee cannot sell the shares within the next 3 years | - |
| - | Market value of shares if unrestricted | £1000 |
| - | Risk of forfeiture reduces their MV by 20% to | £800 |
| 01/04/2012 | Risk of forfeiture expires | - |
| - | Market value of shares (now unrestricted) is | £2000 |
Employment Income Tax charges
If no elections made (see BIM44385):
| Year | - | Amount |
|---|---|---|
| 2008/09 | Income Tax charged on | £800 |
| 2011/12 | Income Tax charged on £2000 x 20% = | £400 |
Deductions for employing company
| Year | - | Amount |
|---|---|---|
| a.p.e 31/12/09 | Deduction | £800 |
| a.p.e 31/12/12 | Deduction | £400 |
Example B - Forfeitable shares - forfeiture period less than 5 years
Facts
| Date | - | Amount |
|---|---|---|
| 01/04/2008 | Employee is given 1000 shares, subject to a risk of forfeiture over the next 4 years | - |
| - | Market value of shares if unrestricted | £1000 |
| - | Risk of forfeiture reduces their MV by 35% to | £650 |
| 01/04/2012 | Risk of forfeiture expires | - |
| - | Market value of shares (now unrestricted) is | £3000 |
Employment Income Tax charges
If no elections made (see BIM44385):
| Year | - | Amount |
|---|---|---|
| 2007/08 | No Income Tax charge on acquisition | - |
| 2011/12 | Income Tax charged on | £3000 |
Deductions for employing company
| Year | - | Amount |
|---|---|---|
| a.p.e 31/12/08 | Deduction | Nil |
| a.p.e 31/12/12 | Deduction | £3000 |
Example C - Shares acquired before 16/04/2003: forfeiture period 5 years or more
Facts
| Date | - | Amount |
|---|---|---|
| 01/04/2003 | Employee is given 1000 shares, subject to a risk of forfeiture over the next 9 years | - |
| - | Market value of shares if unrestricted | £1000 |
| - | Risk of forfeiture reduces their MV by 35% to | £650 |
| 01/04/2012 | Risk of forfeiture expires | - |
| - | Market value of shares (now unrestricted) is | £5000 |
Employment Income Tax charges
| Year | - | Amount |
|---|---|---|
| 2002/03 | Income Tax charged on | £650 |
| 2011/12 | Income Tax charged on £5000 - £650 = | £4350 |
Deductions for employing company
| Year | - | Amount |
|---|---|---|
| a.p.e 31/12/03 | Deduction | Nil |
| a.p.e 31/12/12 | Deduction | £5000 |