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  • Tax cost basis calculation - share pool / vesting of SAYE shares with ISA transfer

    Hi, I recently had a SAYE plan mature, and elected to exercise the options, keep the shares and part transfer into my ISA using this year's allowance which was thus far all available. There are be some remaining SAYE shares (over the ISA allowance) remaining in the GIA, where I already hold some shares in the same company acquired historically (years ago, with no recent transactions). In terms of sequence of events, the process required by my broker was that after vesting of the SAYE plan, all the shares were temporarily transferred from the employer‘s share plan platform to the GIA, and from there partially moved to ISA, leaving behind the rest, as expected. My question comes when figuring out how to calculate the tax cost basis for the remaining shares in the GIA at the end of all this. For the sake of argument let’s assume the following: Existing historical shares in GIA: 1,000 shares at £10.00 cost each. Cost basis £10,000. SAYE vesting: 2,571 shares at £7.00 strike price, total cost £17,997. Market price upon ISA transfer: £15.00, so that max SAYE shares transferred to fill ISA allowance: 1,333 shares. Scenario 1: Assume SAYE shares are transferred into ISA without touching the “pool cost base”, i.e. just transferred at option exercise price. Existing historical shares in GIA: 1,000 shares at £10.00 cost each. Cost basis £10,000. Plus (2,571-1,333)=1,238 SAYE shares remaining in GIA post ISA transfer, at a cost of £7.00 each, total cost (1,238*7.00)=£8,666. Total “new” GIA pool is 2,238 shares, £18,666 cost basis. Scenario 2: Assume all SAYE shares are added to the GIA pool, then the ISA transfer shares are removed at the blended cost (similar to a sale). Existing historical shares in GIA: 1,000 shares at £10.00 cost each. Cost basis £10,000. Plus 2,571 SAYE shares at £7.00 each, cost of £17,997. “Interim” combined GIA pool of 3,571 shares for a total cost of £27,997. From there, we transfer into ISA the 1,333 shares at a “pro rata” cost basis of (1,333/3,571)*£27,997=£10,451. Leaving in GIA: (3,571-1,333)=2,238 shares Cost basis of (£27,997-£10,451)=£17,546. I would be inclined to believe that scenario 1 is the most likely one, because the SAYE shares moved into the ISA do not constitute a taxable transaction and so should not contribute to moving the tax cost basis per share of the remaining pool, but admittedly I’m doubtful on this. What is the correct approach, for my records going forward? Many thanks in advance