Taxation of shares transferred to a director or employee
Understanding how to account for employee securities and shares.
Shares in companies are commonly used by employers to remunerate directors and employees. These are sometimes transferred under a formal plan which may have written rules which specify when and how many shares will be transferred and sometimes the shares or options are transferred as ‘one-off’ awards.
Where employees receive shares or other securities from their employer as a reward for their employment, then the money’s worth of the shares less any payment made by the employee will normally be taxed as earnings.
All shares and securities acquired in connection with an employment come within the scope of the employment-related securities regime. The rules also extend to rights or opportunities to acquire securities, and to benefits in connection with shares and securities that are not otherwise chargeable to tax.
They cover cases where the securities, or rights to acquire securities, are provided by an entity other than the employer, and where the securities are not directly received by the employee.
The HMRC manuals have information at the following:
