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HMRC internal manual

Employment Related Securities Manual

Employment-related securities and options: what are securities?

Finance Act 2003 broadened the scope of the legislation so that it now applies in relation to a wider class of financial products, described in the legislation as “securities” (ITEPA03/S420). Finance (No. 2) Act 2005 added insurance contracts and Finance Act 2006 added a specific mention of options, both with effect from 2 December 2004. Forms of Alternative finance investment bonds (including certain Islamic finance “Sukuk” arrangements) have been included in the definition of securities since 14 August 2007. The following are defined as “securities”:

* Shares ERSM20120  
* Contracts of insurance ERSM20130  
* Loan Stock (both company and government) ERSM20140  
* Warrants ERSM20150  
* Certificates conferring rights to securities held by others ERSM20160  
* Units in a collective investment scheme ERSM20170  
* Options and futures ERSM20180  
* Contracts for differences ERSM20190  
* Alternative finance investment bonds ERSM20191  
  • These general categories are widely drawn and the detailed guidance paragraphs should be consulted in cases of doubt.
  • See ERSM20200 for exclusions from this list.

Pre-16 April 2003: Definition of ‘share’

Before Finance Act 2003, the legislation used the term ‘shares’. In this context ‘shares’ normally included company loan stock, but did not include government loan stock. Convertible shares were the exception in that the legislation only applied to shares, in the strict sense of the word, excluding both company and government loan stock.