Err, yes

Facebook paid no UK corporation tax for the second year in a row in 2013, while employees received shares in the company worth tens of millions of pounds.

On which shares those peeps paid income tax one presumes? At 45%?

13 thoughts on “Err, yes”

  1. Not necessarily. If it is an approved share scheme and you leave the shares in it for 5 years (may have changed, it was 5 last time I worked for a company with such a scheme), you can take them out tax free.

  2. SIPs is £3,600. 4,500 employees at £3,600 is £16.2 million. Not quite “tens of millions” but not far off.

    And that’s just “free shares”; if the employees put in £1,800 of their own money the company can give them another £3,600 of free “matching” shares each, which would take it up to £32.4 million, definitely tens of millions.

    And that’s just free gift shares; there’s also the option-based schemes (£6,000 per year for SAYE, £30,000 for CSOP).

    Don’t know if they are doing that, but it’s certainly possible.

  3. But the bigger point is that this is lefties whinging about the consequences of doing what they say they want – worker ownership.

  4. These are RSUs – if Facebook are like other US firms, the UK employees will just be on the US stock plan, with no modifications to get them UK tax-approved status. So the grants will almost certainly be taxable at full rates as they vest, yes.

  5. Richard – not sure where you get 4,500 staff from. See the Guardian story below. The numbers don’t make immediate sense – Did staff get £15.5m or $118m? Either way, the numbers don’t suggest a small tax approved share scheme. Possibly the scheme was structured to make any gain a CGT event but even so there would be tax to pay. Typical shyte reporting of a tax matter. If I had a company with a £1m profit and paid myself a £1m bonus to get rid of it, hey presto a succesful company paying no CT. It’s one of the reasons that Murphy pisses me off so much. A tax ‘expert’ endlessly quoted who delibertaely miss-represents issues like this and ends up influincing the media who are too dumb to know any better

    “The company employed an average of 172 UK staff, who were paid £40.8m last year, almost double the 2012 figure of £21m.

    This is because of a £15.5m payment cost for “share-based payments

    UK staff received 1.52m free Facebook shares worth $118m at their current share price of about $78”.

  6. And that’s just free gift shares; there’s also the option-based schemes (£6,000 per year for SAYE, £30,000 for CSOP).

    But in all these cases, when the employee finally cashes in they will be liable for capital gains tax (and quite whopping amounts of it in the case of the free gift shares, where the entire price of the share will be profit for them).

  7. If we’re talking about £3,600 of SIP shares, there’s unlikely to be any CGT on sale either because it’ll be covered by the £11,000 CGT annual exemption.

    Even if the value goes up more than 3-fold, the sale can be spread over two tax years.

    Not that I’ve any objection to that, of course, but the fact is that it could all be tax-free.

  8. Andrew, 4,500 employees I got from a quick Google, that it’s building an office near King’s Cross for that number. I suppose that might be allowing for future expansion though.

    But you’re right, the numbers you quote from the article don’t seem to make sense. Unfortunately journalists’ understanding of tax (or even numbers) is so poor that it is very difficult to work out what is actually going on.

  9. Pellinor, 15 years ago I worked in a law firm and got HMRC approved status for non-UK share schemes. Not sure if it’s still done, but it certainly was possible back then. It didn’t have to exactly match the UK schemes, just be broadly equivalent.

  10. I remember reading in the Sunday Times that some multi national had “slashed it’s US tax bill” and so read on, wondering what terrible thing the company had been up to. Turns out if “paid large bonuses” which “reduced its taxable profits”. Fuck me I thought, that’s clever and devious tax avaoidance. Reducing your profits by paying staff. I look forward to a story about a fish & chip shop slashing its tax bill by buying cod and potatoes.

  11. Richard – yes, it can be done, but you need to take some steps to sort it out. In my experience a lot of US firms don’t bother.

    G – employees are charged to income tax (40/45%) not CGT (28%) on free shares, unless they qualify for one of the special schemes. That tax bill comes when the employees get the shares, not when they sell them, so the tax liability is larger and earlier than you might think. Generally a large chunk of the shares which nominally go to the individuals are actually sold on their behalf to pay off the tax.

  12. Andrew

    I don’t run a fish and chip shop, but since I stopped using slaves in the business, my taxable profit has nose-dived. I’m worried that if I ever return to the UK this will make me a tax avoider/evader and liable to summary execution.

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