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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 and share option schemes: meaning of 'relevant shares'

Section 554I(4) ITEPA 2003

This page defines ‘relevant shares’.

‘Relevant shares’ is a technical term in Part 7A ITEPA 2003.

In Sections 554J to 554M and 554Z7, ‘relevant shares’ means:

  • shares (including stock) in B,
  • instruments issued by B which are securities for the purposes of Part 7 Chapters 1 to 5 ITEPA 2003 within Section 420(1)(b) ITEPA 2003 see ERSM20140, or
  • units in a collective investment scheme (as defined in Section 420(2) ITEPA 2003) managed by B which are securities for the purposes of Part 7 Chapters 1 to 5 ITEPA 2003 within Section 420(1)(e) see ERSM20170.

Securities within Section 420(1)(b) ITEPA 2003 are, broadly speaking, debt instruments.

Groups

If B is a member of a group of companies, ‘B’ in that definition includes any other company which is a member of that group.

To decide whether B is a member of a group, you apply the rules for corporation tax on chargeable gains (see CG45100 onwards) with one modification.

The chargeable gains test is a 75% test. For the purposes of Section 554I(4), you change ‘75%’ to ‘51%’ throughout.

‘Relevant shares’ and ‘securities’

Section 420 ITEPA 2003 gives ‘securities’ a wide definition for the purposes of Part 7 Chapters1 to 5 ITEPA 2003. Section 554I(4) gives ‘relevant shares’ a narrower definition. Therefore, ‘securities’ within Section 420 will not necessarily be ‘relevant shares’ within Section 554I(4).