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I was handed a contract last year by my American company, which is listed on the US stock market (I'm based in the UK with a UK subsidiary) whereby they would give me a number of RSUs each year for several years, basically to secure my loyalty. This first year I wanted to keep all of the shares, due to tax reasons and because believe the share price will go up. I was told in this situation if I kept all the shares, they would vest into a stock broker account they had me set-up and the company would then take the money out of my paycheck 4 weeks later and pay this as the tax.

However, due to administrative errors on their part I wasn't asked for my preference and approximately 40% of the shares were sold to cover the tax burden. They've informed me they're unable to reverse this trade or resolve it directly with the stock brokerage due to trading rules and legal reasons.

They've suggested that if I wish I can send funds from my personal account to the brokerage company when I get paid and purchase them directly by working with their team there. They've told me the funds must come from me and cannot be sent by the company.

The company will then re-reimburse me for the difference in stock price between the vesting and the purchase share price.

  1. Does this make sense? I'm concerned that by buying shares with post tax income, I'll have ended up being taxed twice or have increased my taxable income.
  2. Additionally I'm concerned that by doing this I'm going to be hit by my bank for GBP->USD exchange fees, foreign money transfer charges, broker purchase fees etc. I also understand that here might be a delay in the funds being credited in the brokers account - and they might want additional funds to cover fluctuations in price etc during the purchase. Further than that I'm concerned that by the time I'll be able to make the purchase (4 weeks after vesting) the foreign exchange rate will be different. Is there any way I can ensure I don't end up out of pocket?
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Does this make sense? I'm concerned that by buying shares with post tax income, I'll have ended up being taxed twice or have increased my taxable income. ... The company will then re-reimburse me for the difference in stock price between the vesting and the purchase share price.

Sure. Assuming you received a 100-share RSU for shares worth $10, and your marginal tax rate is 30% (all made up numbers), either:

  • you receive 100 shares worth $1,000 and pay $300 in tax

or

  • you receive 70 shares worth $700 and buy 30 more shares for $300

So you're in the same spot either way. You paid $300 to get $1,000 worth of stock.

Taxes are the same as well. The full value of the RSU will count as income either way, and you'll either pay tax on the gains of the 100 shares in your RSU our you'll pay tax on gains on the 70 shares in your RSU and the 30 shares you bought. Since they're reimbursing you for any difference the cost basis will be the same (although you might get taxed on the reimbursement, but that should be a relatively small amount).

This first year I wanted to keep all of the shares, due to tax reasons and because believe the share price will go up.

I don't see how this would make a difference from a tax standpoint. You're going to pay tax on the RSU either way - either in shares or in cash. how does the value of the shares going up make a difference in tax?

Additionally I'm concerned that by doing this I'm going to be hit by my bank for GBP->USD exchange fees, foreign money transfer charges, broker purchase fees etc.

That might be true - if that's the case then you need to decide whether to keep fighting or decide if it's worth the transaction costs.

  • I think the problem with buying the shares in a later year is the author might be be eligible to pay a higher rate of tax if their income has increased and/or have the additional cash to hand to cover the tax burden (especially if the value has gone up as they hope) – ChrisFletcher Jun 7 '17 at 23:11
  • @ChrisFletcher If I read the question right, the lag is only 4 weeks, so income, tax rates, exchange rates, etc should not be a factor. – D Stanley Jun 8 '17 at 13:19

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