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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Employment provided through third parties: exclusions: earmarking for employee share and share option schemes: meaning of 'exit event'

Section 554I(6) ITEPA 2003

This page defines ‘exit event’.

Exit event

In Sections 554K and 554M, an ‘exit event’ occurs in six circumstances.

  • Shares in ‘the relevant company’ are admitted to trading on a stock exchange.
  • All the shares in the relevant company (or a substantial proportion of them) are disposed of to persons none of whom are connected with any of the persons making any disposal.
  • If the business of the relevant company consists wholly or mainly in the carrying on of a trade:

    • the relevant company ceases to carry on the trade (or a substantial proportion of it), and
    • on that occurring, a person who is not a ‘relevant connected person’ starts to carry on the trade (or the proportion of it).
  • The relevant company’s assets (or a substantial proportion of them) are disposed of to a person who is not a ‘relevant connected person’.
  • The winding up of the relevant company starts that is:

    • the company passes a resolution for its winding up,
    • a petition for the winding up of the company is presented, if the company has not already passed such a resolution and a winding up order is made on the petition, or
    • an act is done in relation to the company for a similar purpose, if the winding up is not under Insolvency Act 1986.
  • A person (P) who controls the relevant company ceases to control it, so long as no person connected with P starts to control it.

The relevant company

If the relevant shares mentioned in Section 554K or 554M are shares (including stock), the relevant company is the company in which they are shares.

Otherwise, the relevant company is the company which issued those relevant shares.

Relevant connected person

A relevant connected person is a person who:

  • is connected with the relevant company,
  • is a shareholder in the relevant company, or
  • is connected with a shareholder in the relevant company.

‘Connected with’ and ‘control’

‘Connected with’ has the meaning given by Section 993 ITA 2007.

‘Control’ has the meaning given by Section 995 ITA 2007.