BIK and incidental cost of disposal of shares

[slate79]

Hi,

Last October I disposed of shares that I purchased through my company's shares purchase plan.

The shares were purchased at a discounted price (15% off the fair market value). I sold the shares after the company was delisted from the Stock Exchange. An ADR cancellation fee (approximately 1.2% of the share price) was charged on each share.

I have the following questions:
- do I have to pay Benefit in Kind tax due to the fact that I received the shares at a discounted price?
- how do I calculate how much BIK tax I have to pay?
- what are the relevant revenue forms I need to fill out?
- can this BIK tax cost be considered an incidental cost of disposal and be deducted from the disposal consideration amount for Capital Gains Tax purposes [1]?
- can the ADR cancellation fee be considered an incidental cost of disposal and be deducted from the disposal consideration amount?


Thanks in advance.


[1] I'm using the computation sheet in appendix 2 of the Guide to Capital Gains Tax http://www.revenue.ie/en/tax/cgt/leaflets/cgt1.pdf

 

[Domo]

Firstly would need to see the details of your company share purchase plan to ascertain the type of plan and then the tax treatment.

Your HR department should be able to give you guidance. Did the company not give you any guidance already?

This would not be a BIK, but could give rise to an income tax liability depending on the type of plan.

 

[ClubMan]

You are most likely liable for income tax on the difference between the discounted acquisition price and the market price at the time of acquisition. And you will probably be classed as self assessed for 2008 as a result - I'm in the same boat! See this and other posts of mine in the same thread.

 

[slate79]

The guidance I received from my company was:
- pay BIK tax on the 15% purchase price discount
- pay CGT tax on the disposal

I guess my original question about whether I need to pay BIK was unncessary... I have been told I need to pay it, I just thought I'd ask to find out if it sounds right to you all.

My real question deals more with whether I can consider the BIK tax and the ADR cancellation fee as incidental costs of disposal. I reckon BIK tax would be a bit of a stretch, but ADR cancellation fee fits the description of an incidental cost. Would you agree?

BTW, where can I find out more about BIK tax? I'm looking for a Revenue guide on BIK tax and the relevant forms I need to fill out.

Thanks.

 

[ClubMan]

The guidance I received from my company was:
- pay BIK tax on the 15% purchase price discount

It's NOT BIK! It's income tax (at your marginal rate) and you probably have to pay it within 30 days of acquiring the discounted shares via a Form RTSO1. You will then most likely be classed self assessed for the year in question so have to file a Form 11 return by October 31st the following year. This will continue as long as you have non PAYE income (including nominal income in respect of discounted share acquisitions via an ESOP/ESPP).

- pay CGT tax on the disposal

CGT is an issue if you hold onto the shares and subsequently dispose of them at a gain with respect to the market value at the time of acquisition. If you sell immediately then income tax on the discount is the only tax liability.

I guess my original question about whether I need to pay BIK was unncessary... I have been told I need to pay it, I just thought I'd ask to find out if it sounds right to you all.

Income tax - not BIK!

My real question deals more with whether I can consider the BIK tax and the ADR cancellation fee as incidental costs of disposal. I reckon BIK tax would be a bit of a stretch, but ADR cancellation fee fits the description of an incidental cost. Would you agree?

I imagine that the ADR cancellation fee can be written off against CGT if relevant but certainly not against income tax.

BTW, where can I find out more about BIK tax? I'm looking for a Revenue guide on BIK tax and the relevant forms I need to fill out.

Look on www.revenue.ie for "self assessment", "Form 11", "RTSO1" etc.