Share price means employee’s annual limit might be exceeded

[fishtank]

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HMRC requires us to value the initial allocation of Free Shares based on the closing mid-price when the London Stock Exchange closes today (15 October 2013)
Share price performance means employee’s £3,000 annual limit could be exceeded
Based on Royal Mail’s share price performance to date, it is possible - but by no means certain - that the initial market value of a full-time employee’s Free Shares could exceed their £3,000 annual limit.

If this were to happen, an allocation worth as close to £3,000 but not exceeding it would be made to each eligible full-time employee on 15 October 2013.

All the surplus shares not allocated to individual eligible employees on 15 October 2013 will be allocated as soon as possible after the beginning of the new tax year on 6 April 2014, subject to them remaining eligible. Eligible part-time employees will also receive their Free Shares in two allocations.

Please remember that for any allocation, the share price can go down as well as up. The actual value of an employee’s shareholding will be defined by the share price if/when they choose to sell their shares. We will keep you updated on a regular basis about the share price performance.

Next steps

We will shortly write to all eligible full-time and part-time employees to tell them the number of Free Shares they have received, the price at which they have been awarded and the initial market value of the Free Shares they have been given.

A formal allocation notice will be sent by the SIP Trustee at a later date.

[Lounge Lizard]

"If this were to happen, an allocation worth as close to £3,000 but not exceeding it would be made to each eligible full-time employee on 15 October 2013." - so this is a tax fiddle like all those wealthy people have been doing for longer than anyone can remember.

[RobertT]

"If this were to happen, an allocation worth as close to £3,000 but not exceeding it would be made to each eligible full-time employee on 15 October 2013." - so this is a tax fiddle like all those wealthy people have been doing for longer than anyone can remember.

By law we can only recieve a maximum of £3k in a SIP per year, so why is it a tax fiddle?

[Lounge Lizard]

"If this were to happen, an allocation worth as close to £3,000 but not exceeding it would be made to each eligible full-time employee on 15 October 2013." - so this is a tax fiddle like all those wealthy people have been doing for longer than anyone can remember.

By law we can only recieve a maximum of £3k in a SIP per year, so why is it a tax fiddle?

Because Share Incentive Plans, first introduced in the UK in 2000, are an HMRC (Her Majesty's Revenue & Customs) approved, TAX EFFICIENT all employee plan.
Royal Mail could give us each £30,000 of shares if it so chose, but the tax liability on each of us would make that NOT tax efficient.

[fishtank]

I reckon and it's just a punt that a full-time allocation will be around 700 shares.
At the moment that would value the allocation at around £3,360.
They could hold back around 100 shares until next april.

[RobertT]

Because Share Incentive Plans, first introduced in the UK in 2000, are an HMRC (Her Majesty's Revenue & Customs) approved, TAX EFFICIENT all employee plan.
Royal Mail could give us each £30,000 of shares if it so chose, but the tax liability on each of us would make that NOT tax efficient.

Exactly - so there's no fiddle going on!

[DB1100]

Doesn't matter for the part timers,we won't get over £3000 worth.

[fishtank]

Doesn't matter for the part timers,we won't get over £3000 worth.

It does although I'm not sure why unless the limit is also pro-rata.

Eligible part-time employees will also receive their Free Shares in two allocations.

[dixon]

How come the bribe of £300 to cross the picket line wasnt pro rata like everything else they give us???????????????????????????????????????????????????

[fishtank]

How come the bribe of £300 to cross the picket line wasnt pro rata like everything else they give us???????????????????????????????????????????????????

It was.

*In 2013-14, in addition to a 2.6% base pay increase there would be a non-consolidated lump sum of £300 (pro-rata for part-timer employees).

[Lincox]

So how will the value of shares allocated next April differ from what they would be if they were allocated immediately? Is it possible that there will be a fall in value in which case should we not have been given the option to pay tax on them at the higher value?

[fishtank]

So how will the value of shares allocated next April differ from what they would be if they were allocated immediately? Is it possible that there will be a fall in value in which case should we not have been given the option to pay tax on them at the higher value?

It doesn't matter what the value is today,tomorrow or next april.
The only value that matters is when you sell them which won't be for 3-5 years.
What might make a difference is having to wait another 6 months before you can sell any allocated next year but that's all speculation.

[wandle]

I reckon and it's just a punt that a full-time allocation will be around 700 shares.
At the moment that would value the allocation at around £3,360.
They could hold back around 100 shares until next april.

Based on a closing price of 489p, they could allocate 613 of that 700 this tax year:
613 x £4.89 = £2997.57, the closest they could get without breaching the £3k limit

[wandle]

So how will the value of shares allocated next April differ from what they would be if they were allocated immediately? Is it possible that there will be a fall in value in which case should we not have been given the option to pay tax on them at the higher value?

Why would you want to pay tax on the excess shares, when you could receive the "worth more than £3k" shares free of tax by way of a short delay (6 months) .
Six months IS a relatively short delay, when viewed against the prospect of having to hold the initial shares for 5 years

[Lincox]

I was basing it on the value of the shares going down below what they might be worth at the moment less 20% tax, but I think Fish has highlighted that it is what they are worth in 3 years time is the crucial factor