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HMRC internal manual

Employment Related Securities Manual

HM Revenue & Customs
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Employment-related securities and options: shares

The current definition of securities includes shares in any body corporate (wherever incorporated) or in any unincorporated body constituted under the law of a country or territory outside the United Kingdom.

Although in general law a LLP is regarded as a ‘body corporate’, for tax purposes we will not normally regard any United Kingdom partnership, limited partnership, or limited liability partnership as a ‘body corporate’, (see BIM82115 and ITTOIA2005/863 for more details).

So, an employee promoted to partner in a trading or professional partnership will not be regarded as acquiring an employment-related security, unless that partnership is a collective investment scheme (see ERSM20170). Where mixed activities are carried on the case will be considered on its facts.

Current provisions restricted to ‘shares’

Various provisions or reliefs in the revised legislation refer only to shares. In this context company loan stock is excluded, so that only shares in the strict sense of the word are referred to. Where stock is mentioned, as in ITEPA03/S420 (8) the reference is to the alternative (American) expression for shares. The provisions that refer only to shares include:

  • ITEPA03/S421F (exclusions: public offers)
  • ITEPA03/S421H (meaning of “employee-controlled”)
  • ITEPA03/S429 (case outside charge under section 426)
  • ITEPA03/S443 (case outside charge under section 438)
  • ITEPA03/S446R (case outside Chapter 3C)
  • ITEPA03/S451 (application of chapter 4A - spin-outs)
  • ITEPA03/S452 (market value on acquisition)
  • ITEPA03/S453 (taxable amount under Chapter 4)
  • ITEPA03/S454 (deemed election for disapplication of Chapter 2)