Responding to revenue letter on Share Options

Hi,

A colleague showed me a letter he received from Revenue inquiring about his share option transactions in 2013-2014. "Based on a review of employee share option information, your tax affairs are being considered...". The kind of thing that sends you scurrying back to check your own records!

He says he paid any tax in full, although not within the 30 days.

So I suspect he may be liable for some penalty or interest as a result of that delay, if Revenue want to go that route. But at least he is sure he didn't hide anything.

In the letter, they said something like "if any tax liability has not been discharged within the 30 day period, please enclose a cheque paying the tax due plus any penalty and interest". That was odd to me - how does he calculate his own penalty and interest?

They asked a second question in the letter: about whether he 'assigned a right or released a right' which resulted in a gain. I can't help him with that as I've no idea what they mean by assigning rights to shares. I did advise him to find out before answering yea or nay!

Any ideas?

Cheers.

The Revenue have obtained information from your colleague's employer. Interest is at a daily rate of 0.0219% is charged from 30 days after the share options is exercised to date of payment. I wouldn't bother calculating any penalty as this is generally determined by the Revenue. The only thing that comes to mind is if your friend didn't file a tax return on time with details of the share option contained on it. Form 11 is most likely form to be filed and if this is filed late a 10% surcharge applies where it is more than 2 months late (and 5% if under 2 months).

Your second only arises if the person transferred his options to others - they should know themselves if this happened. It is unusual enough.