The information on this page should be used for discussion purposes only. For any personal advice please reach out to a tax professional.
Stock Option Plan
In principle Taxed at Exercise. However, this summary assumes the shares are readily convertible assets at the time of acquisition (i.e. publicly traded or close to being publicly traded, or otherwise liquid - which means for example exercised in connection with a tender offer / secondary). If exercises occur at a time when the shares are not readily convertible assets (which is outside of a tender offer since GitLab is not publicly listed), GitLab UK Ltd is not required to withhold or report income tax and NICs are not due. GitLab UK Ltd is required to complete the annual share scheme return regardless of whether the shares are considered readily convertible assets. Finally, for those UK taxpayers who are not residents of Scotland, the income tax rates below the maximum tax rate ranges from 20% on annual income up to GBP 37,500, and 40% on annual income between GBP 37,500 and GBP 150,000. There is also a tax-free personal allowance of GBP 12,500, which is reduced by GBP1 for every GBP2 earned above GBP100,000. The income tax rates for residents of Scotland range from 19% on annual income up to GBP 14,549, 20% on annual income between GBP 14,550 and GBP 24,944, 21% on annual income between GBP 24,945 and GBP 43,430 and 41% on annual income between GBP 43,431 and GBP 150,000. The maximum combined tax withholding rate assumes that the employee is not a resident of Scotland.
The "spread": Difference between the Offer Price and Exercise Price.
The UK provides a tax planning opportunity under a 'Section 431 Election'. This applies to UK option holders that exercise their stock options outside of a tender offer. By entering into the S431 election, option holders are electing to be subject to UK taxation at exercise of your stock options based on the fair market value of GitLab's shares without regard to any liquidity restrictions on the shares.
Why would option holders do this? The purpose of the S431 election is to confirm that the shares have been acquired for the unrestricted market value, and not at a discount because of the restrictions attached. When stock options are granted they have two different values according to UK tax law:
The UMV this will always be higher than the AMV. Provided that the option holder pays the full UMV for their shares as at the time of the exercise and makes an election within 14 days after the exercise, the option holder will not be required to pay an income tax charge on the future growth in the value of the shares when they are eventually sold.
The option holder will therefore not be subject to additional taxation if/when such restrictions are lifted (otherwise, taxation applies at exercise on the difference between the value of the restricted shares at exercise and the exercise price, and also if/when the restrictions are lifted). The Section 431 Election must be made no later than 14 days after the date the option holder exercises the stock options. Upon entering into the Section 431 Election, please return a copy of this form to email@example.com.
GitLab is required to withhold income tax on the taxable amount and remit the withheld tax through the Pay-As-You-Earn (PAYE) system within 14 days after the end of the UK tax month during which the taxable event occurs (or within 17 days after the end of the tax month if paying electronically). The UK tax month runs from the 6th day of the month to the 5th day of the next month. For example, assuming the taxable event occurs during the UK tax month April 6 to May 5, the income tax withheld must be remitted to HM Revenue & Customs (HMRC) by May 19 (May 22 if paid electronically).
Yes (partially uncapped)
Yes (partially uncapped)
GitLab must withhold employee social insurance contributions and remit both employee and employer social insurance contributions (National Insurance Contributions / “NIC”). If applicable, Apprenticeship Levy due through the PAYE system within 14 days after the end of the UK tax month of the exercise (or within 17 days after the end of the tax month if paying electronically).
Employee NIC Rate:
Employer NIC Rate:
Monthly Tax Reporting:
Annual Tax Reporting:
GitLab must electronically submit an annual share scheme return (previously known as Form 42) reporting to HMRC the equity award grant and the acquisition of shares. This return is due by July 6 following the end of each tax year.
GitLab also must issue Form P60 (the summary year-end individual statement), including the taxable amount, to each employee by May 31 of the year following the year in which the taxable event occurs.
If an additional income tax liability accrues to the employee because the local employer is unable to withhold the income tax and the employee fails to reimburse the tax within 90 calendar days of the end of the tax year (and has not sufficiently indemnified the employer against having to bear the tax liability), the taxable amount on which such income tax is due must be reported on the annual return of benefits provided to employees (Form P11D). The return must be submitted to the Revenue by July 6 following the end of the relevant tax year.