Mrs P has just found out that back in 2007 she was granted 1000 share options at USD$1 a share, to be accrued over 5 years. So at present we can purchase around 760 shares at USD$1 each; current market value is around USD$20, so a tidy profit if we decided to sell them straight away (which we’re apparently able to do). Her employer is a US company and is listed on the NYSE.

If we sell the shares and take the profit, is there any reason we couldn’t have the proceeds deposited into an Australian account (we’re dual citizens) so as to reduce our tax liability (since we haven’t had any Oz income for a while)? Or would the earnings still be taken into account in her UK income regardless?

cheers 🙂

As far as I understand it, which isn’t very well, unless you brought the money in to the uk there would be no tax to pay in the uk. Plus you can only be a resident of one of the countries at a time for tax purposes so no tax to pay in oz either. Which all sounds to good to be true, so i’ll refer you to my earlier comment about limited understanding and suggest you need professional advice…..i’d be interested in the outcome though.

There are various rules on share schemes, such that if they qualify you will only be looking at CGT on the gain. I am out of date on these but the employer will know. If in the CGT regime you probably can’t benefit from being a non dom if you have been here for seven out of the previous ten years because they is a £30,000 charge to maintain the status which is more than the gain so it would be better to take the CGT hit, most of which will be covered by the £10,100 annual allowances. (The gain on 760 will probably be slightly less that the allowance based on curretn exchange rates). If the allowance is insufficient, it would make sense to sell them in two tax years if you have no other gains so you will get the lot tax free.

If not in a qualifying scheme, the gain will be taxable as income at your wife’s marginal tax rate.

Quick bump as we’re still trying to figure this out!

Thanks for the post Mefty (sorry it took a while for me to reply!)

but the employer will know.

Employer is saying it’ll be UK income and will be taxed at income tax rates, so 40%!?

If not in a qualifying scheme, the gain will be taxable as income at your wife’s marginal tax rate.

So that sounds like this scheme isn’t qualifying?

My thought is this: why can’t we just sell these US shares, in the US (which we have to do), then instead of banking the funds here, we bank it into our Aussie account?

if you have been here for seven out of the previous ten years

We’ve lived in the UK for 6 years now, fulltime… couple of visits back home but not worked there at all in this time.

My thought is this: why can’t we just sell these US shares, in the US (which we have to do), then instead of banking the funds here, we bank it into our Aussie account?

I was in a scheme which may or may not have been the same- US employer, working in UK- iirc shares had to be sold through an agent of the company, and the payouts were transferred back to the UK subsidary, then processed through payroll. I’m pretty sure they weren’t subject to paye though- it was a few years back, but I’m sure that if I’d got hammered for tax I’d remember.
I wasn’t looking for alternatives to the standard payout though, so couldn’t say that what you want to do wouldn’t be possible, or whether you’d need a US broker.

You may find ( like I did last year ) that you will end up paying tax in the USA at the rates applicable to them, this was deducted in the form of shares passed to he US treasury to offset my tax libility on the whole lot.

I had to fill in a form stating I was a UK tax payer and after a few weeks got a refund in my salary from HM Treasury for the excess amount of tax paid.

Make sure you fill out the W8-BEN form when she sells the shares, or you’ll have 30% withholding tax deducted at source. Proving that you not a US resident & not liable to US tax in order to get it back is a monumental PITA (FCO-certified copy of your passport in order to apply for a temporary US social security number, then fill out a Form 1040 -US income tax return. Took me over a year last time I had to do it).

I’ve been in a similar position in the past and I think the fact they are US shares is irrelevant.

Your wife was granted the options as part of her UK employment so UK tax is due.

Any US tax can be avoided because UK/US have an agreement. You just need to fill in the relevant forms before you sell the shares.

You need to find out whether the scheme is approved or not. If its unapproved (many overseas share plans are unapproved because the US business doesn’t think about UK tax) then the gain is subject to UK income tax. If you do have a US tax bill it is likely to be refunded provided you go through the hurdles since you are not US resident.

Your UK employer (assuming they know about the shares) should pay over the tax due and may have some mechanism to recover the tax (for example by holding back proceeds for sale).

If its approved you are into CGT on the gain, and no PAYE. There are also National Insurance hurdles. Big savings if its CGT.

Thanks guys! How do we know if it’s ‘approved’ or not? Assuming you mean ‘HMRC Approved’?

If its unapproved (many overseas share plans are unapproved because the US business doesn’t think about UK tax) then the gain is subject to UK income tax.

I’m guessing this may be the case, her US company is pretty bl**dy stupid when it comes to thinking about their overseas employees!

Make sure you fill out the W8-BEN form

+ lots, if you actually hold the shares and receive dividends then you need to fill this in also. Affects tax treatment for both dividends + sales.

Highly unlikely that the US shares will come under any UK HMRC approved scheme as discussed above. So you need to fill the W8-BEN jobbie in.

I was in a scheme which may or may not have been the same- US employer, working in UK- iirc shares had to be sold through an agent of the company, and the payouts were transferred back to the UK subsidary, then processed through payroll.

Pretty much exactly what Mrs P has to do, unless we can figure out if it’s possible to send the dosh to Oz!

Make sure you fill out the W8-BEN form

Thanks for the tip, have passed this on to her!