CGT on sale of shares acquired via company scheme

[gvonge]

Some years ago I was employed by a company which ran a share ownership scheme whereby, for every share purchased, the company matched the acquisition.(The scheme was HMRC approved wrt income tax)

If I sell these shares, what price do I declare for CGT. e.g. I buy 1 share at 60 GBP, the company matches it so I have 2 shares. Is the acquisition price for CGT 60 GBP or 30 GBP?

[Gengulphus]

Some years ago I was employed by a company which ran a share ownership scheme whereby, for every share purchased, the company matched the acquisition.(The scheme was HMRC approved wrt income tax)

If I sell these shares, what price do I declare for CGT. e.g. I buy 1 share at 60 GBP, the company matches it so I have 2 shares. Is the acquisition price for CGT 60 GBP or 30 GBP?

I last dealt with shares acquired through an employer share scheme over 5 years ago, so things may have changed, but the general principle then was that the acquisition price for CGT was the amount (if any) that one actually paid for the shares plus the amount (if any) that was taxed by Income Tax as a result of the acquisition. And a general principle for CGT is that if you acquire the same type of share in two or more different ways, the acquisition costs are 'merged', i.e. the combined holding is counted as acquired for the combined acquisition costs.

So on the face of it, you have one share acquired for £60 and one share acquired for £0, which are promptly merged into a holding of 2 shares acquired for a total of £60. But do check whether you had anything taxed by Income Tax as a result of the acquisition - if so, the amount taxed by Income Tax is also part of the acquisition cost. Note that that's the amount taxed by Income Tax, not the amount of Income Tax you paid on it - for example, if the matching share was valued at £100 for Income Tax purposes when it was given to you and you were a higher-rate taxpayer at the time and so paid £40 tax on that £100, its acquisition cost would be £100 and so the holding would be 2 shares acquired for a total of £160. (By the way, I'm not saying that I either expect or don't expect you to have been charged Income Tax on the matching share - it's just that I don't know whether Income Tax is charged on such matching shares, and it's far easier for you to check whether you were charged Income Tax than for me to research what type(s) of company share scheme might be involved and whether Income Tax is charged on them.

And note also that I describe the holding as "2 shares acquired for a total of £60", not as "2 shares acquired for £30 each". They're mathematically equivalent, of course, but if you do CGT calculations for shares in "amount per share" terms rather than "total paid" terms, you'll end up doing a lot more divisions and multiplications, and also facing a lot more "how many decimal places do I need in this price per share to avoid excessive rounding errors?" decisions.

Gengulphus

[gvonge]

Thanks, that helps. As I recall, income tax wasn't payable under this scheme if the shares were held for 5 years. (Long past now)

The fun part is now going to be working out how stock splits/mergers and spin offs affect the postition. (Whereas I started with shares in the one company, these have now transformed into 4 different ones)