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HMRC internal manual

Employment Income Manual

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Employment income provided through third parties: exclusions: earmarking for employee share option schemes: how Sections 554L and 554M are related

Sections 554L and 554M ITEPA 2003

The exclusions under Section 554L are not available unless there is a specified vesting date which is at most ten years after the grant date. See EIM45355.

So, Section 554L cannot cover cases where there is no fixed time limit for A to become able to exercise the option because this event is linked to exit events.

Section 554M caters for such cases. Sections 554L and 554M impose similar conditions. But Section 554M requires the vesting to be linked to certain exit events taking place, rather than within a ten year time limit.

These exit events are (to summarise) a sale, flotation or winding up of the company in which the shares are held.

On Section 554L, see EIM45405 onwards.

On Section 554M, see EIM45435 onwards.