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Posted Wed, 23 Nov 2022 20:39:58 GMT by Melissa Medeiros
Urgent inquiry My former company is insisting that I pay them cash to cover my 40% income tax bill at the same time I exercise my ISO employee stock options (ordinary shares). They are a private company, and are not registered in any UK tax advantage scheme. I have no immediate opportunities to sell the shares once exercised. I would prefer to pay the income tax directly to HMRC via self-assessment but they are refusing, claiming they have tax withholding obligations and I must pay them directly. What is the UK tax law on this?
Posted Fri, 25 Nov 2022 14:22:17 GMT by HMRC Admin 32
Hi,

You do not mention the country your employer is based in. The term withholding tax refers to the money that an employer deducts from an employee’s gross wages and pays directly to the government. The vast majority of people who are employed in the United States are subject to tax withholding. The amount withheld is a credit against the income taxes the employee must pay during the year.

Non resident aliens are also subject to withholding taxes on earned income as well as on other income such as interest and dividends from the securities of U.S. companies that they own. Withholding tax is deducted from U.S. residents and nonresidents who earn money from American sources.

If you are UK resident, you would declare the income in the foreign section of the tax return and claim witholding tax relief.  

Tax on foreign income

Thank you.
Posted Fri, 25 Nov 2022 14:53:05 GMT by Melissa Medeiros
Hi, I am a UK resident and my former company is also based in the UK. My employment contract is with the UK limited company. They are incorporated in the Cayman Islands. I am no longer employed by the company.
Posted Tue, 29 Nov 2022 10:42:16 GMT by HMRC Admin 2
Hi,

The guidance we provided still applies.

Thank you.

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