HMRC internal manual

Employment Related Securities Manual

Employment-related securities and options: 'by reason of employment' - exception for family or personal relationships

Exceptionally, the deeming provision is removed where:

  1. the person by whom the right or opportunity is made available is an individual, and
  2. the right or opportunity is made available in the normal course of the domestic, family or personal relationships of that person.

We take a common-sense view of this exception. It would clearly apply if a father, on reaching retirement, hands over all the shares in his family company to his son and daughter simply because they are his children, even if they are both also employees of the family company.

However, it is a question of fact, and it is possible for the employment, rather than the family relationship, to be the reason for the gift, and where that is the case the shares will be employment-related securities.

This may well be the case where large numbers of employees were given shares and they included a son and a daughter of the proprietor.

Personal relationships can also include friendships and it is not unknown for a proprietor to pass on his business to a long-time employee with whom he has developed close personal ties. The principal question to be asked is whether an employer is trying to reward or provide an incentive to an employee in passing over such shares to him/her, or whether the reason is more personal than an employer/employee relationship.