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HMRC internal manual

Employment Related Securities Manual

HM Revenue & Customs
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Restricted securities: the charge

A charge to income tax and, if appropriate, NICs, occurs on the occasion of a chargeable event (per ITEPA03/S426). The taxable amount arising on the occasion of the chargeable event is treated as employment income of the employee for the tax year in which the chargeable event occurs (‘the relevant tax year’).

There are exemptions in certain cases of control, where the event will not be a chargeable event - see ERSM20290.

Chargeable events

There are three types of chargeable event (ITEPA03/S427):

  • the lifting of all restrictions from the securities, before they have been disposed of to an unconnected person;
  • the variation of any of the restrictions, before they have been disposed of to an unconnected person;
  • the disposal of the securities to an unconnected person, before all the restrictions have been lifted.

The variation of a restriction includes the removal of a restriction, so for a security with a number of restrictions attached, a chargeable event will occur on each and every occasion that one of the restrictions is removed or comes to an end by the passing of time.

When the securities are subsequently disposed of, relief is available for the amount charged to tax under Part 7 ITEPA03 for the purposes of the capital gains tax computation (see CG56328)

NB: The acquisition of restricted securities is not a chargeable event. For the initial charge on acquisition of restricted securities, see ERSM30300 and ERSM30370.