Over a period of several years I was given about 25000 of my company's shares as performance awards and options. Usually I had to wait 3 years before I could take delivery of them but when I retired in 2012 the last of them became available to me immediately and I took delivery by the end of May 2012, planning to keep them indefinitely for their dividend income. In December 2012 I was worried about the US fiscal cliff situation and decided to sell them and have since kept the proceeds in a Money Trader account. My question is will I pay Capital Gains Tax on all of them or will the proceeds of those that I had for less than 3 years be taxed at my marginal rate?
Did your company tax any of the shares when you retired?
Speakupsays: 23 January 2014 at 16:43
Each time I took delivery of shares I paid income tax on their value, both during my employment and at retirement.
Since posting this question I have made further enquiries and I have been told that the recent sale of my shares would be treated as a capital gain not as revenue because I'm not a trader i.e. I'm not buying shares just to sell them and make a profit. Please comment.
TaxTimsays: 23 January 2014 at 16:56
CGT will be applicable only once you dispose of the shares after paying tax on the initial granting or offering to you.
Effectively there are two tax events:
1. The granting of the option and the date you are allowed to sell them (the vesting period) and; 2. The date you dispose of the shares.
Event 1 - is a revenue event, as you are receiving these shares due to employment and therefore are subject to normal tax on income as revenue for which PAYE is withheld.
Event 2 - is when you actually dispose of the shares. This would be a capital event and be the difference in the gain between when you are allowed to sell the shares and when you did sell them.
SO if the shares were sold the day you were allowed to sell them then there would be no CGT, any further gain between the vesting date and the selling date, or loss in fact would be subject to CGT.
I hope that helps?
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