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HMRC internal manual

Employment Related Securities Manual

HM Revenue & Customs
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Restricted securities: definition of 'restriction' - potential disadvantage

ITEPA2003/S423 (4) extends the definition of restriction to cover any circumstance where there is not a specific restriction on the securities (caught by ITEPA2003/S423 (2)&(3)), but the employee would suffer a disadvantage if any rights were exercised. For example, if a shareholder does not receive the dividends from the shareholding, this would be a restriction within ITEPA2003/S423 (3). However, if the dividend income is received, but there is an agreement that it must be passed back to the person who provided the shares, this would be a restriction within ITEPA2003/S423 (4). So too would be a rule that required an employee to leave the employment if the shares were sold (the mirror image of a forfeiture condition).