Small business investment

M

mifa1

Guest
I have a small start up business and also work PAYE.

I have just excercised some share options that I received from my PAYE job.

I want to invest the proceeds from this into my business. Do I have to pay capital gains tax or PAYE tax on this prior to investing?
 
If you got the options at a discounted price then you are liable for income tax on the difference between that price and the market price on the day you exercise them. This income tax is payable via a [broken link removed] unless you have already made arrangements for adjustment of your tax credits to collect any liability. If you sell immediately then you have no further tax liability. If you hold and sell at a further gain then you are liable for CGT on the gain. That's how it works for PAYE workers anyway. Not sure if your new dual PAYE and self employed status has any implications. Talk to an accountant if you are not sure. The rules could also be different for Revenue approved schemes.
 
Thanks for the feedback.
The options were not discounted. I got the options based on a closing price on a specific date.
Am I correct in assuming that I am liable only for CGT on this?
Are there any tax exemptions on investing this directly into a business?
 
You mean that you paid the market price when exercising them? Then did you hold onto them for a while and sell them at a gain? If so then you are liable for CGT only. I presume you didn't sell them immediately after exercise otherwise you would have made no money? I don't think that there is any rollover relief for reinvestment and believe that it was abolished a few years back.
 
mifa1 said:
Are there any tax exemptions on investing this directly into a business?
Click to expand...

No, there are not.

You could, however, set up the contribution as a loan to the company and take it out at a later date without having to declare it as income from the company.
 
I think the OP is saying that he exercised options which he had been awarded previously. There would have been income tax due on the value of options exercised. Presuming that he 'exercised and sold' (i.e. did not hold onto the shares after exercising), there would be no CGT liability. See sections 1.1-1.2 of [broken link removed] for details, assuming that the option scheme was not one of the few Revenue approved schemes.
 
This post is not clear - i.e. it's not clear if the option price was the market price on a the day that they were exercised (in which case selling immediately would result in no gain at all) or if the options were free in which case the previous analysis is correct (income tax on the full value).
 
Given that the OP referred to 'the proceeds', there was certainly some gain involved.
 
You must log in or register to reply here.
Back
Top