Tax on Stock Purchase

C

conord

Guest
I am signed up for my company's stock purchase plan and bought 2 lots of shares throughout last year, one set in April, one set in October. I never paid tax on acquring them, thought it could be done when they were sold. I now find out it is supposed to be declared within 30 days of the purchase date. Is there anyone out there who would be able to tell me how to back pay the tax, I'm aware an RTOS form has to be filled in but will it be relevant considering the share purchases were made last year? Any help would be appreciated.
 
The tax due on acquiring only applies to any discount you got compared to the fair market value (FMV) of the shares. This discount is treated as income and needs to be declared on the form and sent in. If the amounts are fairly small, they will adjust your tax credits for this year to reclaim the amount.
 
Thanks rainyday, just another question, considering I never filled in the form last year, when filling it in now should i include any potential fines/fees in the amount or would I be charged for this later on? If so, how would this be calculated?
 
I'm not an expert, but I'd guess that you can't calculate the penalties and Revenue will let you know about them pretty sharpish if they choose. The sooner you 'fess up to them, the less likely they are to hit you with penalties.
 
Just to add to what Rainy said, the tax due is on the complete difference between what you actually buy them at and the market price. Often these shares are part of US ESPP plans where the shares are bought at a 15% discount to the lowest of either the start or end price. Some people incorrectly assume income tax in only due on the 15% discount with possibly CGT on any remaining profit, sadly this isn't the case. Income tax is due on the complete price difference.
The US tax system treats these ESPP schemes specially - possibly to encourage employee savings and ownership. The revenue hammers ESPP schemes in Ireland by essentially treating them as options (though in practice this is what they are).
The 30 day ruling seems harsh, a delayed cheque could leave someone paying the tax before seeing any money. The way the scheme is handled in Ireland pretty much forces an employee to sell the shares immediately if any signifigant gain has occurred.
Shame the revenue don't treat them similarly to ESOT schemes which seem to be to some extent tax free.

[broken link removed] has the details and the following example

If the shares are trading at US$65 at the beginning of the six month offer period on the Stock Exchange and trading at US$72 at the end of the six month offer period the shares can be purchased at 85 % of US$65 (US$55.25 per share). The charge to income tax will be US$72 less US$55.25 per share.
In this instance the amount charged to income tax is more than 15% of the market value of the shares at the date of purchase.
 
I don't think you need worry overly about paying interest, the main thing is that you pay the tax even if you are late. I know of folk who continued to pay the ESPP tax at the end of year even after the 30 day rule came in and no interest charge was sought. If the Revenue have to come after you for the tax though they may not be quite so understanding ;-)
 
You must log in or register to reply here.
Back
Top