What is the locked in value of a share

  • Thread starter gaffer falls
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gaffer falls

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What exactly is the locked in value of a share.
I had some shares in a company I worked for (Alcatel/Lucent) bought in a employee share scheme about 6 years ago,the locked in value was 2400 euro.
I decided to sell these instead of the option of transferring to a broker and to my horror,they only realized 600 euros.Did I lose 2400 less 45% tax plus interest at say 3% over 6 years less 600
 
What do you mean "locked in" value? A share in a company is only worth what a buyer is prepared to pay for it! If you bought for €2.4K and sold for €600 then you have lost €1.8K plus other expenses. I have no idea where the 45% tax figure comes from.
 
Was the higher rate of tax 45% 6 years ago?

I'd imagine that the "locked in value" is the market value on the date you bought the shares and is the operative figure off which you paid income tax. It sounds like a scheme term to me.

Did you pay income tax at the time? It does indeed look like you have a capital loss then of €1800.

Sprite
 
Thanks for that.It was an employee share scheme. I cant remember the exact details but you got tax relief on the amount you bought them for ( similar to pension contributions ) and could sell them with no tax obligation after 5 years.
I could not find the term locked in value defined anywhere in the investment sites, probably as was said a term used in the scheme, ie. what i paid for them.
Paid 2400, tax relief 46% so bought for roughly 1400. sold for 600, loss 800 plus interest for 1400 over 5 years.
A word of caution to other employees in such a scheme, you will get a letter after 5 years, giving the option of selling or transfering to a broker.Check what the shares are likely to realize before deciding to sell
 
gaffer falls said:
Paid 2400, tax relief 46% so bought for roughly 1400. sold for 600, loss 800 plus interest for 1400 over 5 years.
Click to expand...
Are you sure about your calculations there? They don't make sense to me. In most cases of Employee Share Purchase Programmes (ESPPs) you put money away over a certain period of time and then at the end of some period (e.g. 6 months) you can purchase shares at a discount - often 15% below the lower of the market value at the beginning or end of the purchase period (or maybe at a price set earlier set at some other point in time). So you get a certain number of shares based on how much you have saved and what the discounted purchase price is. Normally you are liable for income tax on the discount involved but in some cases (Revenue approved schemes?) there may be an option to avoid this by holding the shares for a period of time. However once you have bought the shares you are investing/speculating and subject to normal market fluctuations in the price of the shares. It would be extremely rare (to the point of never happening!) that there would be any guarantee on the price at which you will be eventually sell the shares for. After purchasing the shares you are liable for CGT as normal on disposal if the eventual disposal price is above the market value at the time of acquisition.

Anybody participating in an ESOP/ESPP should always read the scheme rules/documentation before signing up and make sure that they understand them and that they suit their particular investment needs. No offence but it sounds like you simply did not understand the ins and outs of the scheme if you are getting a nasty surprise now about how much your investment is worth.
 
OK - in that case (as I hinted at above) the specific tax treatment may be different to an ESPP (Revenue approved or not) but the bottom line is that there is almost certainly no guarantee on the value of the share at the time of disposal which seem to be the main point here?
 
Thats right, you pay your money and take your chance like with any share purchase.
The scheme I'm in is administered by Mercer, and they use the term "Locked-in value" for the amount you paid for the shares
 
Thank you Berni, thats the one.Shares were bought at the top of the dot com boom so I should not be surprised I guess.
Now if I lost 800 and the goverment lost 1000 wonder who gained the 1800.
Whats the double entry.
 
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