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bigduckontax
bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 3004
Experience:  FCCA FCMA CGMA ACIS
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I live and work in the UK company that is U.S. Startup and

Customer Question

Hi. I live and work in the UK for a company that is U.S. Startup and have been given the option to early exercise my stock options (NSO) using a promissory note. My question is, should I use this mechanism to purchase the stock prior to our IPO?
Thanks
Matt
Submitted: 1 year ago.
Category: UK Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question. As these are US stock options they are un-approved under HMRC rules.
Taylor Wessing give the following advice:
'There is no income (or other) tax charge on grant of an unapproved option.'
They further advise:
'On exercise of the option, income tax will be charged on the difference between the market value of the shares at the date of exercise of the option and the option exercise price.'
As the option is to be exercised before the stock is traded on the LSE then there is no available market value so you should avoid any Income Tax on the exercise of your options.
It would therefore appear to be to your advantage to buy in before the IPO. That assumes that you are not over extending your own financial resources and that the shares are as safe as an investment as any other start up organisation.
It may well, if you intend a substantial investment, to seek local, trusted advice on the subject.
I do hope that I have given you some indication of a way forward. Caution is the watchword.

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