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HMRC internal manual

Employment Related Securities Manual

University Spin-outs

Research Students

Example 4: Socrates & Aristotle

Socrates and Aristotle are research students who have been working on the Republic University project on faster-acting hemlock. When the spin-out in Example 2 (ERSM100110) is set up, and before funding is introduced, they are each offered 2 shares for £2, together with an employment position to continue the research. The shares are worth £100 each


Socrates accepts the shares but is returning to Greece and declines the employment opportunity. His shares will not be employment-related securities, as he was not employed by the University and will not be employed by the spin-out, and he will not need the Chapter 4A relief. Any gain, if the spin-out succeeds and he can sell for a profit, will only be liable to CGT if he is then within the scope of UK taxation.

Aristotle accepts both the shares and the employment position. To remove any Income Tax and NIC liability on acquisition he will claim the relief available under Chapter 4A as the employment with the spin-out company means his shares are employment-related securities.