Helping the business to better understand approved stock option issues including UK EMI schemes vs US ISOs/German unapproved stock options
Our fintech client had issued US ISOs (tax qualified stock options) to the UK CEO, a US citizen who had become a UK tax resident. The CEO was unsure of the issues that could arise from the different tax treatment of ISOs between the US and the UK. He was particularly concerned about what would happen in an ‘exit event’ and how the stock would be valued and taxed differently.
Additionally, the British CFO, who had been issued Enterprise Management Incentive (EMI) approved options was now planning to spend more time in Germany due to changes in post Brexit regulations. He was concerned about how these options would be treated for tax purposes in Germany, and if they would lose their UK tax efficient EMI treatment.
How did we help?
We advised on the UK and US tax treatment of ISOs and highlighted the potential issues. In the US under rules at the time they would be taxed at 20% when sold, but in the UK they would not be regarded as tax efficient so would be taxed at 45% and at exercise. We prepared a paper with calculations for the Board to advise on the cost and cash flow impact on the CEO, including policy recommendations on how to reimburse and support him.
Similarly, we prepared a paper with calculations on the difference in tax treatment between the UK on the EMI options (approved) versus Germany (unapproved), the difference in tax costs, timing issues and policy recommendations on how to provide support and reimbursement.
We provided the executives and company with a straightforward overview of the tax treatment in the various countries and that was tailored to their personal circumstances. We identified how much tax the executives had to pay, when was the best time to exercise and pay the tax and maximised their planning opportunities. They had confidence they were compliant with the complex tax rules and understand what support the company would provide to ensure they were not worse off.
Would you like to know more?
If you would like to learn more about stock options and how they are treated for tax purposes in different jurisdictions, or if you would like to discuss which options are appropriate for your business, please get in touch with your usual Blick Rothenberg contact or a member of our Global Mobility Team listed on this page.
You can also visit our Globally Remote Working Hub for the latest news and insights.