BIM44390 - Specific deductions: employee share schemes: providing shares to employees: qualifying shares: restricted shares: examples

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 拢1000
- Risk of forfeiture reduces their MV by 20% to 拢800
01/04/2012 Risk of forfeiture expires -
- Market value of shares (now unrestricted) is 拢2000

Employment Income Tax charges

If no elections made (see BIM44385):

Year - Amount
2008/09 Income Tax charged on 拢800
2011/12 Income Tax charged on 拢2000 x 20% = 拢400

Deductions for employing company

Year - Amount
a.p.e 31/12/09 Deduction 拢800
a.p.e 31/12/12 Deduction 拢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 拢1000
- Risk of forfeiture reduces their MV by 35% to 拢650
01/04/2012 Risk of forfeiture expires -
- Market value of shares (now unrestricted) is 拢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 拢3000

Deductions for employing company

Year - Amount
a.p.e 31/12/08 Deduction Nil
a.p.e 31/12/12 Deduction 拢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 拢1000
- Risk of forfeiture reduces their MV by 35% to 拢650
01/04/2012 Risk of forfeiture expires -
- Market value of shares (now unrestricted) is 拢5000

Employment Income Tax charges

Year - Amount
2002/03 Income Tax charged on 拢650
2011/12 Income Tax charged on 拢5000 - 拢650 = 拢4350

Deductions for employing company

Year - Amount
a.p.e 31/12/03 Deduction Nil
a.p.e 31/12/12 Deduction 拢5000