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Thoughts on a small predicament

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25slim76
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Thoughts on a small predicament

#281108

Postby 25slim76 » January 30th, 2020, 11:39 am

Just curious to get peoples thoughts on the following situation my father has found himself in -

Through many years of hard work for an oil major he accumulated a reasonable 6 figure sum of shares. The shares in question are XOM which going back a few years were trading around $100 but now seem to be sinking into the low sixties. Obviously it's never a great idea to have all yours eggs in one basket per say and over the past few years I've tried to encourage him to take a look into it but it seems I've now potentially been landed with providing him with some kind of solution. For ten or fifteen years he paid in monthly 5% of his salary whilst his employer matched that 5% on the condition the shares were left in place for 5yrs. He's well surpassed that now so accessing the funds isn't an issue. What I'm interested on getting peoples views on is what would be a sensible approach to managing this money and also how to avoid getting hammered on the various fees and taxes potentially involved in any withdrawal.

Many thanks,

25slim76

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Re: Thoughts on a small predicament

#281110

Postby Alaric » January 30th, 2020, 11:45 am

25slim76 wrote: He's well surpassed that now so accessing the funds isn't an issue. What I'm interested on getting peoples views on is what would be a sensible approach to managing this money and also how to avoid getting hammered on the various fees and taxes potentially involved in any withdrawal.


If not already contributing to one, selling £ 20,000 a year to put into an ISA would seem a sensible diversification. If this incurred CGT, then restrict the sale to keep the gains within the annual limit.

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Re: Thoughts on a small predicament

#281118

Postby PinkDalek » January 30th, 2020, 12:22 pm

25slim76 wrote:For ten or fifteen years he paid in monthly 5% of his salary whilst his employer matched that 5% on the condition the shares were left in place for 5yrs.


Paid in to what?

Is this some sort of pension scheme?

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Re: Thoughts on a small predicament

#281128

Postby Breelander » January 30th, 2020, 12:47 pm

PinkDalek wrote:
25slim76 wrote:For ten or fifteen years he paid in monthly 5% of his salary whilst his employer matched that 5% on the condition the shares were left in place for 5yrs.


Paid in to what?

Is this some sort of pension scheme?


This sounds like it's ExxonMobil's employee share incentive scheme.

Standard 5 year share incentive plan scheme. Buy one get one free up on to 5% of your pensionable pay.
https://www.glassdoor.sg/Benefits/Exxon ... 237_N2.htm

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Re: Thoughts on a small predicament

#281133

Postby fca2019 » January 30th, 2020, 1:01 pm

Hi there, i would sell each tax year below 12k capital gains annual exemption, and below sales proceeds 48k so you don't need to inform hmrc, assuming no further capital gains. I would Invest in an Isa up to 20k per tax year first then use isa allowance of spouse, and children if applicable personally i choose in a vanguard lifestrategy fund.

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Re: Thoughts on a small predicament

#281135

Postby PinkDalek » January 30th, 2020, 1:04 pm

Breelander wrote:
PinkDalek wrote:
25slim76 wrote:For ten or fifteen years he paid in monthly 5% of his salary whilst his employer matched that 5% on the condition the shares were left in place for 5yrs.


Paid in to what?

Is this some sort of pension scheme?


This sounds like it's ExxonMobil's employee share incentive scheme. ...


Yes, thanks, poor wording on my part!

Presumably approved https://www.gov.uk/tax-employee-share-schemes/share-incentive-plans-sips

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Re: Thoughts on a small predicament

#281140

Postby PinkDalek » January 30th, 2020, 1:16 pm

fca2019 wrote:[i would sell each tax year below 12k capital gains annual exemption, and below sales proceeds 48k so you don't need to inform hmrc, assuming no further capital gains. ...


Misleading.

That £48,000 is only relevant to those who have to submit a Tax Return, for whatever reason, and whether or not they are then required to complete the ‘Capital gains summary’ pages. The Tax Return notes for 2019-2020 would look something like:

7 Capital gains summary Fill in the ‘Capital gains summary’ pages and attach your computations if:

• you sold or disposed of chargeable assets which were worth more than £48,000

• your chargeable gains before taking off any losses were more than £12,000 ...
etc.

Taken from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/787630/SA150_2019.pdf but adapted above to 2019-2020.

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Re: Thoughts on a small predicament

#281147

Postby 25slim76 » January 30th, 2020, 1:30 pm

Thanks for the responses. Yes, this was a standard share incentive plan which I only just found out that's what he had since starting this thread!

Is there a way of finding out how much he has actually paid into it? Am I right in thinking it's possible to get the entire original investment out minus any profits tax free?

At present he doesn't complete a tax return so I'm a little unsure what was meant by the £48,000 comment?

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Re: Thoughts on a small predicament

#281158

Postby Breelander » January 30th, 2020, 2:05 pm

25slim76 wrote:...Am I right in thinking it's possible to get the entire original investment out minus any profits tax free?


See...

GOV.UK wrote: Share Incentive Plans (SIPs)

If you get shares through a Share Incentive Plan (SIP) and keep them in the plan for 5 years you won’t pay Income Tax or National Insurance on their value.

You won’t pay Capital Gains Tax on shares you sell if you keep them in the plan until you sell them.
https://www.gov.uk/tax-employee-share-s ... plans-sips

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Re: Thoughts on a small predicament

#281164

Postby airbus330 » January 30th, 2020, 2:27 pm

I don't know if this helps, but I was until recently paying into a similar scheme as the Mobil one described above. We had 2 different share schemes BAYE Buy-As-you-Earn and SAYE Save-as-you earn. The first sounds more like yours where you bought at a discounted rate, matched by the employer, keep for 5 years and dispose/keep CGT free. Our schemes were overseen by the company shareowner management firm EQUINITI. The entire holding and all transactions were available to view online. If your fathers scheme is still in existence it may have been transferred online in a similar way.
Bearing in mind you initial comment about the share price deteriorating, almost every employee in the scheme lost their entire holding when the company liquidated last year. Many lost 10's of thousands.

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Re: Thoughts on a small predicament

#281167

Postby PinkDalek » January 30th, 2020, 2:55 pm

Breelander wrote:
GOV.UK wrote: Share Incentive Plans (SIPs)

If you get shares through a Share Incentive Plan (SIP) and keep them in the plan for 5 years you won’t pay Income Tax or National Insurance on their value.

You won’t pay Capital Gains Tax on shares you sell if you keep them in the plan until you sell them.
https://www.gov.uk/tax-employee-share-s ... plans-sips


Followed by:

If you take them out of the plan, keep them and then sell them later on, you might have to pay Capital Gains Tax if their value has increased.

25slim76 wrote:At present he doesn't complete a tax return so I'm a little unsure what was meant by the £48,000 comment?


That was a side discussion and would only have potential impact if the italicised part above becomes relevant.

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Re: Thoughts on a small predicament

#281308

Postby fca2019 » January 31st, 2020, 8:32 am

@PinkDalek - a bit rude of you and incorrect. If you sell over 4 times the CGT annual exemption outide an ISA and you don't do a tax return you are suppose to inform hmrc.

https://www.rossmartin.co.uk/private-cl ... ital-gains

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Re: Thoughts on a small predicament

#281350

Postby PinkDalek » January 31st, 2020, 11:46 am

fca2019 wrote:@PinkDalek - a bit rude of you and incorrect.


Apologies - it comes up a great deal and wasn't meant to be.

If you sell over 4 times the CGT annual exemption outide an ISA and you don't do a tax return you are suppose to inform hmrc.

https://www.rossmartin.co.uk/private-cl ... ital-gains


That's news to me, clearly, and I might start a thread at Taxes*** on the subject (when I remember). I may have to eat humble pie but what I extracted is what many and more have said over the years both here and at TMF. I'm glad I raised the query though, as it means I may be reeducating myself.

Edit: *** I may use this thread viewtopic.php?p=271711#p271711 which I've this second found.

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Re: Thoughts on a small predicament

#281354

Postby kempiejon » January 31st, 2020, 12:01 pm

I, like pinkdalek, understand that if you'd not normally do self assessment you are not obliged to report the over 4 times allowance (4 x £12k = 48K) if you do not exceed the annual allowance.

If your total gains are less than the tax-free allowance
You do not have to pay tax if your total taxable gains are under your Capital Gains Tax allowance.

You still need to report your gains in your tax return if both of the following apply:

the total amount you sold the assets for was more than 4 times your allowance
you’re registered for Self Assessment

from https://www.gov.uk/capital-gains-tax/wo ... eed-to-pay about half way down.

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Re: Thoughts on a small predicament

#281356

Postby dspp » January 31st, 2020, 12:02 pm

25slim76 wrote:Just curious to get peoples thoughts on the following situation my father has found himself in -

Through many years of hard work for an oil major he accumulated a reasonable 6 figure sum of shares. The shares in question are XOM which going back a few years were trading around $100 but now seem to be sinking into the low sixties. Obviously it's never a great idea to have all yours eggs in one basket per say and over the past few years I've tried to encourage him to take a look into it but it seems I've now potentially been landed with providing him with some kind of solution. For ten or fifteen years he paid in monthly 5% of his salary whilst his employer matched that 5% on the condition the shares were left in place for 5yrs. He's well surpassed that now so accessing the funds isn't an issue. What I'm interested on getting peoples views on is what would be a sensible approach to managing this money and also how to avoid getting hammered on the various fees and taxes potentially involved in any withdrawal.

Many thanks,

25slim76


I've seen the valid comments the others have made re CGT etc.

I have been in similar share schemes with another oil major once. As far as I can see he is well outside the 5-year lockup period so these are simply his shares.

Can I just check some numbers here please.

You say a 6-figure sum of shares. I assume from that you mean a 6-figure sum in value terms, e.g. £250,000 - $150,000 which would be about the number I would expect, rather than the alternative being (say) 100,000 shares x $65ea which would be quite a different matter. So could you firstly clarify that please.

Holding them in XOM is quite a concentration in one place, so shifting them largely (or maybe entirely) out of XOM is sensible for many reasons. How fast to do that and where to put it depends on many factors, one of which is the CGT bill that would be payable if he sold the lot now in one hit.

Are you able to tell us the average price of the accumulated shares, and the approximate time they have been held for (or at least date he started & stopped accumulating) ? If the average price is (say) $45 then the CGT implications are very different than if the average price was (say) $60. That helps get a feel for the appropriate timescale to try and tax manage the CGT issue, i.e. how many years to work it out within the CGT allowance. Oh, and how old is he ?

Regards, dspp

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Re: Thoughts on a small predicament

#281396

Postby PinkDalek » January 31st, 2020, 2:01 pm

kempiejon wrote:I, like pinkdalek, understand that if you'd not normally do self assessment you are not obliged to report the over 4 times allowance (4 x £12k = 48K) if you do not exceed the annual allowance. ...


Sorry but that relates to reporting your gains in your tax return whereas fca2019 is validly talking about what one is supposed to do if one exceeds the £48,000 and doesn't normally complete a Tax Return (not registered for Self Assessment).

Probably best to continue at Taxes (which I hope to do when time available) so as not to detract further from discussions of the Share Incentive Plan itself.

viewtopic.php?p=271711#p271711

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Re: Thoughts on a small predicament

#281417

Postby 0x3F » January 31st, 2020, 2:59 pm

25slim76 wrote:What I'm interested on getting peoples views on is what would be a sensible approach to managing this money


I read that the energy sector % of S&P is at historical lows, with XOM at/around 10 years lows. I'd expect this to revert back, and would be inclined to rotate out of the holding slowly over time rather sell everything in one go and risk jumping from an undervalued sector to an over valued one.

- 0x3F

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Re: Thoughts on a small predicament

#281424

Postby PinkDalek » January 31st, 2020, 3:10 pm

dspp wrote:[Are you able to tell us the average price of the accumulated shares ...


In case you missed it, the OP later wrote Is there a way of finding out how much he has actually paid into it?.

Would this be something to obtain from the employers themselves (albeit likely to be in US$s)?

Bearing in mind these may have been purchased monthly (I don't know the mechanics) there may be about 60 calculations to make or am I misunderstanding?

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Re: Thoughts on a small predicament

#281434

Postby dspp » January 31st, 2020, 3:25 pm

PinkDalek wrote:
dspp wrote:[Are you able to tell us the average price of the accumulated shares ...


In case you missed it, the OP later wrote Is there a way of finding out how much he has actually paid into it?.

Would this be something to obtain from the employers themselves (albeit likely to be in US$s)?

Bearing in mind these may have been purchased monthly (I don't know the mechanics) there may be about 60 calculations to make or am I misunderstanding?


Sorry, I did miss that.

If the start and finish dates of paying in are known, then one can make a very crude approximation. Perhaps enough to understand whether CGT is an issue that will wag the dog.

(The point about perhaps cycling out of XOM slowly may or may not be wise. Perhaps best to understand the oa quantum, the CGT/price, and the person's age before forming a view.)

regards, dspp

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Re: Thoughts on a small predicament

#281437

Postby 25slim76 » January 31st, 2020, 3:29 pm

dspp wrote:I've seen the valid comments the others have made re CGT etc.

I have been in similar share schemes with another oil major once. As far as I can see he is well outside the 5-year lockup period so these are simply his shares.

Can I just check some numbers here please.

You say a 6-figure sum of shares. I assume from that you mean a 6-figure sum in value terms, e.g. £250,000 - $150,000 which would be about the number I would expect, rather than the alternative being (say) 100,000 shares x $65ea which would be quite a different matter. So could you firstly clarify that please.

Holding them in XOM is quite a concentration in one place, so shifting them largely (or maybe entirely) out of XOM is sensible for many reasons. How fast to do that and where to put it depends on many factors, one of which is the CGT bill that would be payable if he sold the lot now in one hit.

Are you able to tell us the average price of the accumulated shares, and the approximate time they have been held for (or at least date he started & stopped accumulating) ? If the average price is (say) $45 then the CGT implications are very different than if the average price was (say) $60. That helps get a feel for the appropriate timescale to try and tax manage the CGT issue, i.e. how many years to work it out within the CGT allowance. Oh, and how old is he ?

Regards, dspp


Sorry, I should have been clearer. Yes, a six figure sum in value terms. The average price is a tricky one to answer as he has never really taken an active role in his finances and so accumulated all these shares but never really retained any of the information as to the finer details of them. After just having a more in depth chat with him he seems to think he started paying in around 1980 and stopped paying in around 2000. To withdraw £12k per year to avoid CGT seems like the most sensible route but is likely to take 20+ years so am thinking if there's a way to find out what he paid in and then withdraw that portion as a lump sum and then £12k per year of the remainder. The big question is how do I find out what he paid in if he doesn't have in his possession any of this information? He's currently 73.

0x3F wrote:I read that the energy sector % of S&P is at historical lows, with XOM at/around 10 years lows. I'd expect this to revert back, and would be inclined to rotate out of the holding slowly over time rather sell everything in one go and risk jumping from an undervalued sector to an over valued one.

Funnily enough this is something that had crossed my mind as well. I've read a fair bit of info suggesting XOM is likely to turn things around in the not too distant future - maybe some wishful thinking but who knows?


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