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HMRC internal manual

Employment Related Securities Manual

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HM Revenue & Customs
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International: commencement of the new rules - up to 5 April 2015

The new rules of Chapter 5A, Part 2 of ITEPA 2003 apply to employment-related securities options and employment-related securities acquired on or after 6 April 2008, except where employment-related securities are acquired pursuant to a securities option which was acquired before 6 April 2008.

Where options that have been acquired before 6 April 2008 are replaced by new options in accordance with ITEPA03/S483 (see ERSM110800) on or after 6 April 2008, then the new option will continue in the old regime and will not be subject to Chapter 5A of Part 2 of ITEPA03.

Example

Tom is R/NOR when, on 25 February 2008, he is granted an option to acquire securities in his employer company. He exercises his option on 30 September 2008 and thereby acquires employment-related securities for less than their market value. As the securities were acquired pursuant to a securities option which was itself acquired before 6 April 2008, the old rules of Chapter 3C will apply and the guidance at ERSM70420 et seq should be followed.

Period from 6 April 2008 to Royal Assent

The new rules on remittance basis for employment-related securities are retrospective back to 6 April 2008 from the date of Royal Assent: that means that between 6 April and Royal Assent the law as it currently stands applies in its full force. Following Royal Assent, the retrospective nature of the legislation means that the law has to be regarded as rewritten.

So, for example, where on 30 April 2008 R/NOR employees acquired securities options or securities that were forfeitable within 5 years, since Chapters 5 and 2 of Part 7 of ITEPA did not apply, the exemptions from a money’s worth, general earnings charge that are provided in those Chapters similarly did not apply. It might therefore be the case that an employer faced PAYE and NICs obligations on the award of an option or securities which, following Royal Assent, were removed, as the awards were exempt from an income tax charge by virtue of the rules of Part 7. See ERSM161020 for guidance on the operation of PAYE on the period between 6 April 2008 and Royal Assent and the remainder of the 2008/09 tax year.