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(b) (i) Advise Benny of the income tax implications of the grant and exercise of the share

题目

(b) (i) Advise Benny of the income tax implications of the grant and exercise of the share options in Summer

Glow plc on the assumption that the share price on 1 September 2007 and on the day he exercises the

options is £3·35 per share. Explain why the share option scheme is not free from risk by reference to

the rules of the scheme and the circumstances surrounding the company. (4 marks)

参考答案
正确答案:
(b) (i) The share options
There are no income tax implications on the grant of the share options.
In the tax year in which Benny exercises the options and acquires the shares, the excess of the market value of the
shares over the price paid, i.e. £11,500 ((£3·35 – £2·20) x 10,000) will be subject to income tax.
Benny’s financial exposure is caused by the rule within the share option scheme obliging him to hold the shares for a
year before he can sell them. If the company’s expansion into Eastern Europe fails, such that its share price
subsequently falls to less than £2·20 before Benny has the chance to sell the shares, Benny’s financial position may be
summarised as follows:
– Benny will have paid £22,000 (£2·20 x 10,000) for shares which are now worth less than that.
– He will also have paid income tax of £4,600 (£11,500 x 40%).