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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

Enterprise Management Incentives (EMI): Taxation of EMI options: Capital Gains Tax – example

Example

B is granted an EMI option to acquire 2,000 shares at market value, £10 each. He leaves the company, a disqualifying event, when the shares are worth £17 each. He exercises his option six months after he leaves the company and sells his shares at once for £25 each. He has no other capital gains in the tax year.

Income tax is payable on the difference between the value of the shares at the date of exercise and at the time of the disqualifying event: £25 - £17 = £8 x 2000 = £16,000.

The CGT charge when the shares are sold during the year 2015/16 will be:

 

 

Sale proceeds £50,000  
     
Less cost (£20,000)  
Less amount chargeable to income tax (£16,000)  
Chargeable gain £14,000  
Annual exempt amount (£11,100)  
Amount chargeable to CGT £2,900  

 

CGT is payable at 18% (if B is a basic rate taxpayer) on the gain of £2,900 = £522.00