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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Employment-related securities: introduction: employee share schemes

A common feature of employee share schemes is that employees may be offered shares, share options, or possibly other assets by reason of their employment. Part 7 ITEPA03 contains special Income Tax rules about cases where securities or securities options are acquired in connection with an employment and the definition of “securities” for the purposes of the employment related securities legislation includes a wide range of intangible assets in addition to shares. See Section 420 ITEPA03. Not all of the assets falling within this definition will give rise to a chargeable gain on disposal. For example, it includes government loan stock. But most will. There are details of CGT-exempt assets at CG11710 and CG12600+.

Some schemes are set up to comply with particular statutory requirements in order to secure beneficial tax treatment. These schemes (with the exception of Enterprise Management Incentives) require prior approval from HMRC and are often referred to as “approved schemes.” By contrast, other schemes are commonly referred to as “unapproved schemes”.

The operation of the TCGA is modified to take into account the Income Tax treatment of employment-related securities. Guidance on employment-related securities and unapproved schemes generally is at CG56321+. Guidance on approved schemes and the Enterprise Management Incentives is at CG56400+. Apart from points covered there, the normal Capital Gains rules apply.