Company shares

Hi folks,

have some company shares which have matured (3 years) and wondering should I sell or keep. No longer any employee of the company so I'm not in a position (like previously) where selling at a lower share price meant the advantage of buying cheaper on the same day. I'm not in a any rush to get my hands on the money (which isn't a massive sum anyway ~ €1500).

I have the usual options of:-

1. transfer to broker
2. hold shares in the trust until further notice
3. transfer into own name
4. Sell shares
5. combinations of the above

First time I've been in this postion, so advice from some sharks would be welcome.
My own thinking is leave in the trust, monitor the share price and sell at a later date when the share price has improved.

The share price now is 17% less than when I purchased.

Thanks in advance,
Mick

The only reason to sell would be (i) to cut your losses if you think the price will go down further or (ii) to crystallise a capital loss to offset against a capital gain (worth 20% to you so would essentially get you back the price you paid).

If you can sell quickly through the trust at a time that you choose, I'd leave them there. Transferring into your own name would mean that it's not easy to sell immediately - you'd need to transfer them into a broker or use the trust. Then it comes down to a matter of cost - it will cost to transfer to a broker and they will probably charge to hold them for you. Compare against the company's trust scheme and make a decision on that basis.

I presume that you've paid any tax that you needed as a result of purchasing the shares (if they were under market value)? If not, then I'd sell enough to cover that tax liability and, if you think the value will increase, hold on to the rest of them.

I'm not a shark btw and what you do will depend on whether you think the share price will go up or down. If your tax is paid and you think that the price will go up and can afford to lose the money, then your thinking as outlined in your post would seem to me to be the best course of action.

Sprite

WaterSprite said:

The only reason to sell would be (i) to cut your losses if you think the price will go down further or (ii) to crystallise a capital loss to offset against a capital gain (worth 20% to you so would essentially get you back the price you paid).

If you can sell quickly through the trust at a time that you choose, I'd leave them there. Transferring into your own name would mean that it's not easy to sell immediately - you'd need to transfer them into a broker or use the trust. Then it comes down to a matter of cost - it will cost to transfer to a broker and they will probably charge to hold them for you. Compare against the company's trust scheme and make a decision on that basis.

I presume that you've paid any tax that you needed as a result of purchasing the shares (if they were under market value)? If not, then I'd sell enough to cover that tax liability and, if you think the value will increase, hold on to the rest of them.

I'm not a shark btw and what you do will depend on whether you think the share price will go up or down. If your tax is paid and you think that the price will go up and can afford to lose the money, then your thinking as outlined in your post would seem to me to be the best course of action.

Sprite

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Thanks Sprite,

clearly a well-informed poster - on the ball.
When you mention the following: "I presume that you've paid any tax that you needed as a result of purchasing the shares (if they were under market value)?" - I'm not sure what you mean by this? If you can elaborate, that would be helpful.

The share price movement is anyone's guess in the current climate I guess. However, I would hedge my bets on an increase. To look at it another way, I can't see them falling too much more and therefore, would be willing to take the risk and hold onto them (famous last words, eh!).

Am I correct is assumming that I will have to pay Capital Gains Tax if I sell the shares for more than their original value? But this is surely an unlikely scenario in the short to medium term (i.e. that the shares would climb 17%, all things being equal?) And even in such a case, there is a personal exemption limit of €1,270 (which I assume means that I will not be taxed on the first €1,270 being payed out if I sold the shares???). Maybe I'm reading this all wrong and please correct me if I am.

Greenhorn financial analyst,
Mick Dundee

I was asking about tax because sometimes companies can allow employees to purchase shares at less than market value - either via a share option or by means of an employee share purchase plan where you can get e.g. 15% discount on then-current market price. The fact that you use the word "matured" when you talk of the shares implies to me that you were granted shares on date X and that you only get to buy/get them on date Y and that the share price was either set on date X or you get them for free. The question is whether, on the date they vest, the open market value of the shares greater or less than the price you paid. If you didn't pay anything and you were just granted the shares after a certain period, then you should talk to your employer's HR department and look at the share plan to determine if you have to pay income tax. I don't know myself how those particular schemes work with regard to tax but, for example, if you paid 15% less than then-current market value for the shares when they vested, you would have to pay income tax on that 15% differential within 30-days of the shares vesting.

With regard to CGT, yes, you will have to pay CGT on the difference between market value on the date the shares vested and the market value on the date you sell. The market value on the date the shares vested will be 100% of the market value, assuming you've paid the necessary income tax, if any (i.e. it's not based on the 85% of market value that you may have paid if you use my example above). The CGT allowance applies (1,270 per annum) and you would pay CGT on any amount gained over that. If the shares go through the roof and are worth more than 1,270 more than the market value when they vested, then you can split out sales between tax years to take advantage of an additional CGT allowance. You can also offset realised losses against the gain, which you have to do before you take that CGT allowance.

Hope this helps

Sprite