Tax on Share options

Hi there,
I have a bit of a dilema facing me. Possibly due to my own stupidty and lack of understanding.

Back in 2003 I excercised Shares options and sold them about 6 months later all in the same year.
I had in 2003 hired a tax consultant to sort this out and i think i though he was also doing it for 2003 also, due to my lack of understanding i now realise that he must not have as this would only be requested in 2004.
this all started when i submitted my tax return this year for 2008, declaring some property taxes etc, and I was also claiming a refund for dental. They wrote back to me to advise that i still owe them a tax return for 2003 due in 2004 (news to me - now) and since have sent a reminder - pity they did not do this years ago ! I certainly did not recieve anythign from them, and as I believed it was all done, i never had cause to look at it any further over the years, as I have always been PAYE.


My questions are simple, I want to get this sorted (well, i dont have much choice now anyway) I have not calulated the tax yet, but i can do this, what i dont know, is what my penalities are likely to be, and i cant find clear info anywhere.
What are the rates for penalities charges for a PAYE worker and is it a one flat fee or a rate per annum etc? is their a maximum that would be charged also.
Would i be charged interest also - what is the rate of interest generally.

This will help me to work out what I owe.

appreciate the help

Hi Sarah

If you are granted an option on shares then once you exercise the option, you are subject to income tax on the the excess of the market value of the shares at the time of exercise, assignment or release, over the cost of acquisition of the shares..Where a right need not be exercised for more than 7 years, an income tax charge will also arise on the date the right is granted.

The tax is due to be paid using form RTSO within 30 days to revenue. Moreover, you are deemed to be subject to self assessment which means you are obliged to file a tax return before the due date. Failure to file makes you liable to a late filing surcharge of 10% of the tax due. There will also be interest which will be running from 30 days after the exercise of the option.

Once you sell the shares you will be liable to CGT on the gain you have made. Again as CGT is subject to self assessment you would be required to make a return of the CGT by the due date. A late filing surcharge of 10% arises on the unpaid CGT and interest will also be running from the date the payment of the tax was due.

If it is a revenue approved share option scheme there is relief for the income tax element but not the CGT.

Hope this helps

dbran

Thanks for the response DBRAN
Any idea how they calculate the interest - do they apply it daily / annually ? If daily, this by my calculation would be huge and very unlikely - is there a max they apply do you know?
Thanks

Unfortunately share options are specifically excluded from the PAYE system .
The interest rate is .02783% per day. The late filing surcharge is 10%. if you manage to get the voluntary disclosure rate

If you got dividends on the shares you need to declare these also.

There may be other credits unclaimed e.g. if your employer pays health insurance this credit may go unclaimed.

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