Capital Gains Tax on ESPP shares

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Warren

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I have been contributing some of my salary into an Employee Stock Purchase Plan (ESPP) for the past few years. The amount contributed from my salary is used to exercise shares at the end of every 6 month period. I paid income tax initially as part of the Relevant Tax on Share Options scheme (returning form RTSO1) and for the past couple of years my employer has deduced the tax directly from my salary.

I recently disposed of some shares which I received about a year ago, paid Income tax on at the time, but subsequently held onto. I may now be liable for Capital Gains tax but want to clarify how to calculate that CGT liability. For example when the shares were exercised their market value was 20 euro but I only paid 15 euro's for the share. I paid Income tax on the 5 euro difference/gain. I am now selling the shares at 22 euro - is it the case that I owe CGT on the 2 euro per share difference (i.e. current value of 22 vs value at exercise of 20 euro).


The leaflet on Share Options schemes (http://www.revenue.ie/en/tax/it/leaflets/it72.pdf) indicates the following "Regardless of when the options are exercised the cost of acquisition is the sum of the following:
• The cost (if any) of the option,
• The price paid for shares on exercise of the option, and
• The amount charged to income tax on the exercise of the option"

I am not sure if this applies to an ESPP and what it really means?

Anybody experienced in this area?

Thanks,
Warren
 
Ok, so did you have to pay anything for the right to buy the shares for €15? How much?

Add this to the €15 you paid for the shares.

Add to this the amount you paid tax on (if the answer to my first question is No, this should be €5 per share).

So, the answer is €20, either way.
 
An ESPP can bear a very close resemblanace to share options but is taxed differently. If your employer is deducting tax on the discounted portion of the share price (€5 in your example) I would confirm that it is being deducted as PAYE. If it is PAYE you do not need to file a tax return solely as a result of getting the shares as the tax would alreadly have been paid on it.

However if your employer is paying your tax, as a share option, under the RTSO scheme then you will also need to file an income tax return for the year in which you exercised the share options. For 2012 exercises the return date is 31 October 2013 and for 2013 exerciss the return date is 31 October 2014.
 
dublin66 said:
An ESPP can bear a very close resemblanace to share options but is taxed differently. If your employer is deducting tax on the discounted portion of the share price (€5 in your example) I would confirm that it is being deducted as PAYE. If it is PAYE you do not need to file a tax return solely as a result of getting the shares as the tax would alreadly have been paid on it.

However if your employer is paying your tax, as a share option, under the RTSO scheme then you will also need to file an income tax return for the year in which you exercised the share options. For 2012 exercises the return date is 31 October 2013 and for 2013 exerciss the return date is 31 October 2014.
Click to expand...

Ok that's different from anything I've read before. My employer is paying hte tax but to be honest Im not 100% sure if its PAYE on ESPP or RTSO. Is there any reference that outlines the difference between the two systems (I've never come across one)?

Thanks,
Warren
 
There is a big difference. If it is being taxed as a share option and tax paid under RTSO then you are a chargeable person automatically and be required to file a tax return.

If it is being paid as PAYE then getting shares in this way will not, of itself, make you a chargeable person.

If you look at your payslip and it is included as a BIK then is is being taxed under PAYE. If there is something else there I would suggest asking your employer.
 
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