Employee Share Purchase Plans (ESSPs) and FIFO rule applicability when selling shares of the same company

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LoveTrees

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Advice please... I've shares in my employer's company already. I bought them through my broker years ago and I'm happy in keeping them.

Now my employer is proposing to me a very good Employee Share Purchase Plan (ESSP). As part of the terms for such plan after a number of years the agent can sell shares on my behalf. The problem is that the FIFO rule on disposing of shares would mess up with my existing portfolio of shares.

Can the ESSP be considered as a separate pool than my own portfolio and so for the same company the FIFO rule won't apply? Thank you so much for any advice...

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The result here can be very confusing - FIFO applies regardless of how you get the shares. I've dealt with calculations whereby employees get shares from ESPPs, share options and even SAYE. All of the shares go into the same pot and the FIFO rules apply subject to the four week B&B rule. You may think you are selling shares from a certain tranche but for tax purposes FIFO applies.
 
I’m caveating this, because it’s a long time since I looked at it, but my recollection is that the LIFO rules exist for these exact scenarios (i.e. “Last In, First Out”).

FIFO is set aside where shares acquired in the prior 30 days are disposed of, e.g. via the exercise of a share option or the accessing and disposal of shares via an ESPP. With an ESPP, the company gather the cash from the employee and then the share deal happens at the end. So, correct me if I’m wrong, but if the share transactions happen at the end, then surely LIFO applies and the earlier shares remain undisturbed from a CGT perspective.
 
Gordon - your understanding of the B&B rules is correct. The B&B would only apply when have an acquisition and a disposal within 30 days (or 4 weeks and I can't recall which. So if an option is exercised and then sold immediately (or within 4 weeks - not sure which) then no CGT owing to the B&B rules and assuming no uplift in value. If the disposal of a share was not within 4 weeks of acquisition then the FIFO rules apply.
 
Yes, my recollection is that “LIFO” is there to prevent the exact scenario that was outlined, i.e. where share based remuneration creates unintended consequences.
 
LoveTrees said:
Advice please... I've shares in my employer's company already. I bought them through my broker years ago and I'm happy in keeping them.

Now my employer is proposing to me a very good Employee Share Purchase Plan (ESSP). As part of the terms for such plan after a number of years the agent can sell shares on my behalf. The problem is that the FIFO rule on disposing of shares would mess up with my existing portfolio of shares.

Can the ESSP be considered as a separate pool than my own portfolio and so for the same company the FIFO rule won't apply? Thank you so much for any advice...

Response deleted, I didn't read the thread properly before responding. ​

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Does anyone know if you must follow LIFO rule if you have recently acquired shares within four weeks, or can you choose to apply FIFO if you also hold shares purchased from a year ago that you want to sell now?
 
dublin67 said:
Gordon - your understanding of the B&B rules is correct. The B&B would only apply when have an acquisition and a disposal within 30 days (or 4 weeks and I can't recall which. So if an option is exercised and then sold immediately (or within 4 weeks - not sure which) then no CGT owing to the B&B rules and assuming no uplift in value. If the disposal of a share was not within 4 weeks of acquisition then the FIFO rules apply.
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Would you have CGT even if the share doesn't increase in price from the day you acquire it?

I would expect as minimum there is due to buying the shares at lower price than market value but selling at market value? Ergo a gain.

Have I got it right?
 
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