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HMRC internal manual

Employment Related Securities Manual

The relevant period - up to 5 April 2015: securities acquired for less than market value other than pursuant to securities option

In a Chapter 3C case not involving a securities option, the relevant period is the tax year in which the notional loan (within the meaning of Chapter 3C) is treated as made or, if the notional loan is discharged in the same year, such that the amount discharged counts as employment income by virtue of ITEPA03/S446U(2) (see ERSM70140), then the relevant period starts with the beginning of the year and ends on the day of the discharge.

In general, this means that the relevant period will be the tax year in which the securities are acquired or, if shorter, the period from 6 April preceding (or simultaneous with) the acquisition of the securities to the date of their disposal or of release of the outstanding liability to pay for them.


Stephen is awarded shares worth £1 each, but is only required to pay 10p per share initially. He is R/NOR in the year of award (2008/09) and claims the remittance basis under ITA07/S809B in that year. At the end of the year he leaves the UK and has no further connection with the UK from that point. 2 years later (2011/12) he sells the shares with the 90p call on each share still outstanding.

The relevant period is 2008/09, i.e. the tax year in which Stephen acquired the partly-paid shares. This is so even though the charge under section 446U on the deemed discharge of the notional loan arises in 2011/12.

The reason for this approach is that the amount of the future section 446U charge is fixed at the time of acquisition, even though the charge itself may not arise until much later. The section 446U income is therefore most closely related to the year of the acquisition.


There may be circumstances in which the employment income that arises from the discharge of a notional loan under Chapter 3C could be said to be earned over a different period. For example, an employer might decide to release an employee from a genuine, deferred obligation to pay for shares because of exceptional performance in a particular year. In such circumstances, as long as the remittance basis applied for the year of acquisition, a just and reasonable override could be used to establish the fair amount of foreign securities income, given that the income might reasonably be regarded as having been earned in the year of the exceptional performance rather than the year in which the employee originally acquired the shares on deferred purchase terms. See ERSM160900 for the operation of the just and reasonable override.